Authored By : S.C. Ghose, J. Pratt

S.C. Ghose and J. Pratt, JJ.

1. This appeal arises out of an application made underSection 525 of the Code of Civil Procedure praying that an award, made bycertain persons described as arbitrators, be filed in Court. The Court belowhas dismissed the application and hence this appeal by the Plaintiff.

2. The facts of the case are briefly these : One Mr.Stevens, the predecessor in title of the Defendant, the Maharajah of Durbhanga,executed a lease in favour of the Plaintiff on the 1st of December 1834, inrespect of a plot of 10 bighas and odd cottahs of land, for 15 years, the leaseexpiring on the 31st October 1899, it being stipulated, among other matters, asfollows: "The said lessee shall be entitled and shall have full rightduring the period of the lease to build upon the land demised any one or morebuilding or buildings of masonry work or otherwise or to plant trees, &c,in the whole or any portion thereof according to the option of the said lesseeand to use the same or to let the same on hire for his own profit just as thesaid lessee might consider just and proper. At the expiration of the period ofthe lease in the event of a now lease not being given, the said lessor shall beat liberty to resume direct possession of the land demised and to take over allthe buildings then standing thereon at a valuation arrived at by threearbitrators, one of whom is to be appointed by the lessor, the second by thelessee and the third by the first two arbitrators so appointed as before. Incase either party neglect to appoint an arbitrator, the other party can, afterone months notice in writing, appoint all three arbitrators and the partyneglecting to appoint shall have no right to raise any objection to thearbitrators so appointed as aforesaid. The decision of the arbitrators as tothe matter of valuation shall be accepted as final by both the parties."

3. The Plaintiff subsequently ejected a building upon theland in question and in the year 1899, before the term of the lease actuallyexpired, there was considerable correspondence between the parties as towhether the lease of the land in question should be renewed and also as to theappointment of arbitrators for the purpose of valuing the building.

4. The Plaintiffs case is that there was no renewal of thelease; that the Defendant did not appoint an arbitrator such as wascontemplated by the terms of the lease of the 1st December 1884 and that he hadtherefore to appoint all the three arbitrators and that the said arbitrators onthe 11th January 1900 made an award determining the sum of Rs. 29,986-12-6, asthe value of the house and the out buildings and as payable to the Plaintiff bythe Defendant. And it is this award which the Plaintiff sought to be filed inthe Court below. The Defendant, however, pleaded that he having offered torenew the lease of the land to the Plaintiff, the latter was not entitled todemand the nomination of an arbitrator for the valuation of the buildingstanding thereupon; that though at one time he, the Defendant, nominated anarbitrator, it was simply to meet any difficulty that might be raised withreference to the construction of the terms of the lease of the 1st December1884 ; that the award, which was sought to be filed, was invalid, illegal andvoid ; and that the arbitrators appointed by the Plaintiff had no authority tomake an award in the matter.

5. The Subordinate Judge has held that the Defendant by hisletter of the 29th July 1899 had expressed his willingness to grant a freshlease of the land to the Plaintiff on the expiration of the term of the leaseof the 1st December 1884 and that, therefore, it could not be said that thelessor did not give to the lessee a new lease as contemplated by the terms of thelease of the 1st December 1884; and hence the contingency under which thematter of the valuation of the building might be referred to arbitration didnot properly arise; and indeed, the reference to arbitration was premature.That officer at the same time, however, is of opinion that the arbitratorappointed by the Defendant was not a duly authorized or an independent andimpartial arbitrator and that the Defendant having neglected to appoint such anarbitrator, the Plaintiff was entitled to appoint all the three arbitrators andthat such appointment would have been good if the reference to arbitration hadnot been premature he has also expressed the opinion that there was nomisconduct on the part of the arbitrators appointed by the Plaintiff and there wasnothing to vitiate the award made by them. In the result, however, theSubordinate Judge being of opinion that the reference to arbitration waspremature and not in accordance with the conditions of the lease, the awardcould not be filed in Court and he has accordingly dismissed the suit.

6. It will be observed that though the Defendant, by hisletter of the 29th July 1899, expressed his willingness to grant to thePlaintiff a fresh lease of the land, neither the rate of rent, nor the periodfor which the Defendant was prepared to grant such fresh lease, was mentioned;and the Plaintiff by his letter of the 31st July 1899, which was in reply tothat of the 29th July, distinctly indicated that he was not prepared to take arenewal of the lease of the land in question and insisted upon the matter ofthe valuation of the buildings standing thereupon being referred toarbitration. And though, later on, the Plaintiff expressed his willingness totake the land and the house standing thereupon at a monthly rent, nothing cameout of it; and indeed, the subsequent correspondence between the parties wasdirected to the appointment of arbitrators for the purpose of valuing thebuildings. It is quite clear, therefore, that the parties were not agreed as tothe renewal of the lease of the land ; and the question here arises whether theparties having not come to an agreement as to the grant of a fresh lease andthe Defendant having simply offered to grant such a lease, there was such acompliance on the Defendants part with the conditions of the lease of the 1stDecember 1884 as precludes the Plaintiff from insisting upon the matter of thevaluation of the buildings being referred to arbitration. The particularpassage in the lease which bears upon this question is as follows: "At theexpiration of the period of the lease in the event of a new lease not beinggiven, the said lessor shall be at liberty to resume direct possession of theland demised and to take over all the buildings then standing thereon at a valuationarrived at by three arbitrators, &c., &c." The Subordinate Judgein holding, as he does, that the offer on the part of the Defendant to renewthe lease was a sufficient compliance with the terms of the lease just referredto, refers to an earlier passage in the same document, which has already beenquoted, wherein the word "give" occurs. And the Subordinate Judgeargues that the word "give" therein used was not meant in the senseof give and take and that therefore the expression, "a now lease not beinggiven," as used in the second part of the document, could only have areference to the action of the lessor and not to anything on the part of thelessee. We are, however, unable to accept this view as correct. The earlierpassage, which the Subordinate Judge relies upon, refers to the rental and theterms and conditions settled between the parties and states that it beingagreed that the lessor should give to the lessee a lease of the lands upon suchrental, terms and conditions, the lease is granted. We fail to see how thispassage can show what the intention of the parties was as to the granting of anew lease as expressed in the latter part of the document. It seems to us thatinasmuch as a new lease could not be given unless the parties were agreed as tothe terms and conditions thereof, the mere offer on the part of the lessor togrant a now lease and this without any terms being mentioned, could not operateas the giving of such a lease, within the meaning of the document in question.The Subordinate Judge, we observe, further states that the liability of thelessor to pay the price of the buildings was contingent on the refusal to granta fresh lease and not on the lessees refusal to take such lease; and thatindeed, the Defendant was not bound to make any offer. We do not understandwhat the Subordinate Judge means by saying that the Defendant was not bound tomake any offer. But leaving this aside, let us suppose that the lessor offeredto grant a fresh lease to the Plaintiff on the most exorbitant terms, which thelessee could not possibly accept: would that be a true and bond-fide,compliance with the conditions of the lease We think not. The SubordinateJudge, however, remarks that there is nothing to show that the lessor refusedto grant a fresh lease on fair and reasonable terms and therefore, there was noground for a reference to r arbitration. We have already referred to the factthat in his letter of the 29th July 1899, the Defendant did not mention anyterms or conditions and indeed the parties from the very beginning did notindicate any intention of any fresh lease being settled upon reasonable terms.That being so, we are unable to agree with the view which the Subordinate Judgehas expressed. We hold that there was no sufficient compliance on the part ofthe Defendant with the terms of the lease of the 1st December 1884, relating tothe grant of a fresh lease and that it follows from this, that if the lessor,without granting a fresh lease, chose to take possession of ;he land, thelessee was entitled to insist upon the valuation of the buildings standingthereupon being determined by three persons to be nominated as provided in thelease.

7. But the real difficulty, which arises in this case, iswhether the reference to the three persons nominated by the Plaintiff for thepurpose of fixing the value of the building, was a reference to arbitration andwhether the award made by them was such as could be filed in Court, ascontemplated by Section 525 of the Code of Civil Procedure.

8. We shall discuss this matter presently ; but before we doso, we may perhaps say that we agree in the conclusion arrived at by the Courtbelow, that the arbitrator appointed by the Defendant was not a duly authorizedarbitrator and that having regard to the facts disclosed in the variouscorrespondence on the subject between the parties, the Plaintiff was justifiedin appointing all the three persons and that there is nothing, so far as we cansee at present, to vitiate the determination made by those persons.

9. Addressing ourselves then to the question which we havealready indicated, it will be observed on a reference to Chapter XXVII of theCode, which deals with reference to arbitration, that Section 525 and thefollowing sections which refer to arbitration without the intervention of aCourt of Justice, have to be read with and by the light of the precedingsections in the same Chapter, which refers to arbitration through theintervention of Court, so far as they may be applicable. And when Section 525Buys that:--"when any matter has been referred to arbitration without theintervention of a Court of Justice and an award has been made thereon," itmust be understood in the same sense as a reference to arbitration ascontemplated by Section 506 of the Code. That section runs as follow:--"Ifall the parties to a suit desire that any matter in difference between them inthe suit be referred to arbitration, they may, at any time before judgment ispronounced, apply in person or by their respective pleaders specially authorizedin writing in this behalf, to the Court for an order of reference," and soon. The question here arises whether there was any matter "indifference" between the parties which could be referred to arbitration;and this question has to be answered by the terms of the lease of the 1stDecember 1884. It was therein contemplated that in the event of a new lease notbeing given, the lessor would be at liberty to take direct possession of theland and take over all the buildings at a valuation arrived at by threearbitrators. At that time, there was and there could be, no difference betweenthe parties concerned for no building had then been erected on the land ; andwe are unable to find upon the correspondence which took place between theparties, that there was any difference between them as regards the true priceof the buildings. The Plaintiff no doubt insisted that the matter of the priceshould be determined by arbitrators, while the Defendant averred that thematter could not go to arbitration by reason of his having offered to give afresh lease to the Plaintiff, but that in order to meet any difficulty thatmight arise as regards the construction to be put upon the terms of the lease,he would appoint the person nominated by him.

10. In the case of Collins v. Collins (1858) 26 Beav. 306,where the parties entered into a contract to purchase a brewery and plant at aprice to be fixed by arbitrators who were to choose an umpire before enteringupon the valuation and the arbitrators could not agree on an umpire and thequestion was raised whether the Court had authority under 17 and 18 Victoria,c. 125, to appoint an umpire for such a purpose:--it was field that the Courthad no authority to appoint an umpire for the said purpose. The Master of the Rollsin the course of his judgment made the following observations: "It becomesnecessary, therefore, to consider what an arbitration is. Now I fully concur inthe observations, that fixing the price of a property may be arbitration. ButI do not think that in f this particular case the fixing of the price of theproperty is an arbitration in the proper some of the term. An arbitration is areference to the decision of one or more persons, either with or without anumpire, of some matter or matters in difference between the parties. It is verytrue that in one sense, it must be implied that although there is no existingdifference still that a difference may arise between the parties; yet I thinkthe distinction between an existing difference and one which may arise is amaterial one and one which has been properly relied upon in the case."Later on he observed:--"It may well be, that the decision of a particularvaluer appointed might fix the price and might be equally satisfactory to both; so that it can hardly be said that there is a difference between them.Undoubtedly, as a general rule the seller wants to get the highest price forhis property and the purchaser wishes to give the lowest and in that sense itmay be said that an unexpected difference between the parties is to be impliedin every case, but unless a difference has actually arisen, it does not appearto mo to be an arbitration." And then he approvingly referred to the caseof Leeds v. Burrows (1810) 12 East 1 where the true distinction between anarbitration in the proper sense of the term and an appraisement or valuation ofa property, was drawn. The principle underlying this case is of equallyapplicable here.

11. In re Carus-Wilson and Greene (1886) L.R. 18 Q.B.D. 7,where one of the conditions to the sale of a piece of land was that thepurchaser should pay for the timber on the land at a valuation and it wasprovided, for the purpose of such valuation, that each party should appoint avaluer and the valuers thus appointed should, before they proceeded to act,appoint by writing an umpire and that the two valuers, or, if they disagreed,their umpire, should make the valuation and where the two valuers appointedbeing unable to agree, the umpire made the valuation, it was held that such valuationwas not in the nature of an award or an arbitration. Lord Esher, M.R., indelivering judgment, observed as follows:--"The question here is, whetherthe umpire was merely a valuer substituted for the valuers originally appointedby the parties in a certain event or an arbitrator. If it appears from theterms of the agreement by which a matter is submitted to a persons decision,that the w intention of the parties was that he should hold an enquiry in thenature of a judicial enquiry and hear the respective cases of the parties anddecide upon evidence laid before him, then the case is one of arbitration. Theintention in such cases is that there shall be a judicial enquiry worked out ina judicial manner. On the other hand, there are cases in which a person isappointed to ascertain some matter for the purpose of preventing differencesfrom arising, not of settling them when they have arisen and where the case isnot one of arbitration, but of a mere valuation." Later on heobserved:--"I think that this case was clearly not one of arbitration andthat it falls within the class of cases where a person is appointed todetermine a certain matter, such as the price of goods, not for the purpose ofsettling a dispute which has arisen, but of preventing any dispute" and soon.

12. Lindley, L.J., while agreeing in the same view,observed:--"A valuer may be in one sense called an arbitrator, but not inthe legal sense of the term. In the ordinary cases of arbitration there is adispute which is referred. The object of the valuation on the other hand is toavoid disputes" and so on. This case has been followed in our Court in thecase of Chooney Money Dassee v. Ram Kinkur Dutt (1900) I.L.R. 28 Calc. 155.There, the suit was for an injunction and damages for encroachment upon theproperty of which the Plaintiff (a Hindu widow) was a life-tenant and an orderwas made by consent that the Defendant was to purchase the Plaintiffs interestin the said property and pay her the price to be settled by certain referees nominatedby the parties the price of the property was ascertained and reported upon bythe referees to the Court and judgment was given by Ameer Ali, J., in favour ofthe Plaintiff according to the said valuation treating it as an award. But itwas held by the Appellate Court that the referees were, in effect, rathervaluators, than arbitrators and no judgment therefore could properly be givenunder Section 522 of the Code of Civil Procedure in terms of their award.Maclean, C.J., in delivering the judgment of t the Court, observed as follows:

It may well he that it was intended, in making that order(i.e., the order of reference to the referees) to make one under Section 506,but obviously it cannot properly be regarded as one under that section, forwhat the so-called arbitrators and umpire were to decide was not any matter indifference between the parties in the suit, but merely to settle the price ofthe Plaintiffs share and interest in the disputed property. They were ineffect rather valuators than arbitrators see In re Cams-Wilson and Greene(1886) L.R. 18 Q.B.D. 7 and if the reference were not properly a referenceunder Section 506, it is reasonably clear that no order could properly be madeunder Section 522, the section under which the learned Judge purported to act.

13. In the present case, though the reference was notthrough the intervention of the Court but a private reference, yet the samereason and principle would equally apply, for the question we have here todetermine is whether there was "any matter in difference" between theparties, which could be and was referred to arbitration and whether thevaluation, as made by the three persons appointed by the Plaintiff, was anaward within the meaning of Section 525 of the Code. And it seems to us thatthis question must be answered in the negative. If, then, there was no award,it is obvious that the determination of the value of the buildings as made bythe three persons appointed by the Plaintiff could not be filed in Court inaccordance with the provisions of that section, nor can a decree be made asprovided by Section 526 of the Code.

14. In this view of the matter, we are unable to give thePlaintiff any relief in this case. He has evidently misconceived his remedy.But what may be the remedy that he is entitled to seek, is not for us to say onthis occasion. In the result, we think this appeal must be dismissed, but inthe circumstances each party will bear his own costs.

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