Login
  • Bookmark
  • PDF
  • Share
  • CaseIQ

Sayyaparaju Surayya v. Nekkanti Anandayya And Others.

Madras High Court
Sep 6, 1949
Important Paras
Please sign up to view Important Paras.
Smart Summary (Beta)

Structured Summary of the Opinion

Factual and Procedural Background

This second appeal arises from a suit for recovery of possession which was dismissed by both Courts below. The plaintiff's case rested on an alienation made by a limited estate holder (the widow of the last maleholder) in favour of the plaintiff, which the plaintiff contended was valid and binding on the defendant, who was the reversioner to the estate.

Earlier, the same plaintiff had instituted a small cause suit against the same defendant for recovery of rent. While that small cause suit was pending, the parties submitted the matter to arbitration outside Court. The resulting award declared that the defendant was a reversioner and that the plaintiff had no title to the property that was the subject of the widow's alienation. Despite the award, a decree was nevertheless passed in the small cause suit because the defendant did not rely on the award in answer to the rent claim.

The later suit (the present suit) raised two main categories of question: (a) whether the alienation by the widow was binding (the validity of the alienation), and (b) whether the suit was maintainable insofar as it claimed an injunction against interference with the plaintiff's possession. The injunction question depended on whether the plaintiff was in possession on the date of the suit — a question of fact on which there were concurrent findings by the Courts below.

Legal Issues Presented

  1. Whether, given that the defendant was found to be one of two reversioners, an injunction should have issued to restrain interference with at least one half of the suit property in the plaintiff's possession.
  2. Whether the unfiled arbitration award (rendered during the pendency of the small cause suit) operates as a bar to the plaintiff maintaining the present suit — i.e., whether the plaintiff may now question the validity or effect of that award in this suit.
  3. What is the effect of Ss. 31 to 33 of the Indian Arbitration Act, 1940, on the maintainability of a suit that seeks relief contrary to an arbitration award not filed in Court?
  4. Whether the defendants' conduct in the earlier small cause suit (not relying on the award) precludes them from relying on the award in the present suit, or gives rise to a defence of res judicata.

Arguments of the Parties

Appellant's Arguments (Mr. Parthasarathy / Mr. Parthasarathi)

  • An injunction should have issued, at least in respect of one half of the property, because the Courts below found the present defendant to be only one of two reversioners; therefore the plaintiff's title to that half was valid and defeasible only by the other reversioner, who had not challenged it.
  • The arbitration award was not of a "finished character" (i.e., was not such as to operate as a bar) and therefore could not render the present suit unmaintainable.
  • Because the defendants did not rely on the award in the earlier small cause suit (where the decree went in the plaintiff's favour), the defendants should not now be permitted to rely upon the unfiled award in the present suit; the defendants' conduct prevented the plaintiff from taking steps to set the award aside.

Respondents' Arguments (Mr. Suryanarayana)

  • The unfiled arbitration award, although not filed under the Act, operates as a bar to the present action and the plaintiff is not entitled to dispute the award in this suit.
  • Sections 31–33 of the Arbitration Act require that questions as to the validity, effect or existence of an award be raised and determined by the procedure provided in the Act (filing the award and applying under the Act), and a party cannot contest the award in an independent suit.
  • Prior authority (Suryanarayana Reddi v. Venkatareddi) supports the proposition that a party may put forward an award fully performed by him, though not filed, in answer to the plaintiff's claim which was the subject matter of the reference and award.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Suryanarayana Reddi v. Venkatareddi Held that Ss. 31–33 (and other provisions) of the Arbitration Act do not preclude a defendant from putting forward an award fully performed by him but not filed under S.14, in answer to the plaintiff's claim which was the subject matter of the reference and award. The Court regarded this decision as supporting the respondents' contention that the unfiled award operates as a bar to the present action; the decision was not considered inapplicable on the ground that invalidity of the award had been raised in the present suit.
Mathukutty v. Varee Kutti Deals with whether a Court on an application under S.34 can avoid investigating objections to the arbitration agreement by saying S.33 is the sole procedure; held that on an application under S.34 the Court may need to go into the grounds of invalidity of the arbitration agreement and may treat objections as akin to an S.33 application. The Court found this decision inapplicable to the present case: Mathukutty concerned S.34 and questions about arbitration agreements in stay applications, whereas the present matter concerns contesting the validity of an award and the mandatory S.33 procedure for challenging an award.
Bhagwandas v. Atmasing (Bombay case) Relied upon in the Mathukutty decision, supporting the view that objections filed in opposition to an application under S.34 might be treated as an S.33-type application. Cited by the Court as a precedent relied on in Mathukutty; the present Court noted this lineage but held the Bombay case and Mathukutty did not assist the appellant on the point before it.

Court's Reasoning and Analysis

The Court proceeded in stages and restrained itself from upsetting the concurrent findings of fact made by the Courts below on the question of the plaintiff's possession on the date of suit.

First, on the injunction point the Court accepted the appellant's submission in part: because the Courts below had found that the present defendant was only one of two reversioners (i.e., the reversioners are tenants-in-common), the plaintiff was entitled in principle to an injunction restraining interference with at least one half of the property which must be regarded as hers by title, defeasible only at the instance of the other reversioner who had not challenged it. The Court recognised the settled law that an alienation by a widow is voidable at the instance of the reversioners and that the success of one reversioner in attacking the alienation can only affect his share.

Second, on the critical question whether the plaintiff could challenge the arbitration award in the present suit, the Court analysed Ss. 31–33 of the Indian Arbitration Act, 1940. The Court emphasised:

  • S.31 permits filing an award in Court and provides that questions regarding validity, effect or existence of an award shall be decided by the Court in which the award has been or may be filed and by no other Court.
  • S.32 bars suits contesting the existence, effect or validity of an arbitration agreement or award and provides that an award shall not be set aside, amended, modified or affected otherwise than as provided in the Act.
  • S.33 prescribes that any party desiring to challenge the existence or validity of an arbitration agreement or an award shall apply to the Court and the Court shall decide the question on affidavits (subject to the proviso allowing other evidence by order).

Applying those provisions, the Court concluded that the statutory scheme requires that challenges to an award's validity be made by the procedure provided in the Act (i.e., by applying to Court under S.33) and not by raising the issue in an independent suit for relief such as recovery of possession. The Court rejected the appellant's contention that the present suit was not a suit "for a decision upon the existence, effect or validity of an arbitration agreement or award" within S.32's mischief; the Court read S.32 as intending to prevent suits that would effectively decide the award's validity other than through the prescribed procedure.

The Court considered and applied the decision in Suryanarayana Reddi v. Venkatareddi, acknowledging that that decision supports the respondents' position that an unfiled award which has been fully performed by the defending party may be put forward in answer to the plaintiff's claim that was the subject matter of the reference and award. The appellant's attempt to distinguish that decision on the ground that the award here was not a "finished" award was rejected: the Court held that the appellant could have availed himself of the Act's procedure to have the award filed and set aside but did not do so, and therefore cannot now dispute the award in this proceeding.

The Court also examined the Mathukutty decision and the Bombay case (Bhagwandas v. Atmasing) relied upon in it, but concluded those decisions dealt with applications under S.34 (stay of proceedings) and the investigation of objections to an arbitration agreement in that context. They did not assist the appellant in avoiding the mandatory S.33 procedure for challenging an award in the present context.

Finally, the Court rejected the appellant's contention that the defendants' conduct in the small cause suit (failing to rely on the award) gave rise to res judicata or estoppel preventing reliance on the award in the present suit. The Court held that an arbitration award rendered outside Court is not strictly equivalent to a Court judgment, and the small cause suit had been concerned only with a claim for rent, not with any adjudication on title arising from the award.

Holding and Implications

Holding: The second appeal is dismissed, with costs.

Implications:

  • The Court accepted that, in principle, an injunction could have issued with respect to the one-half share of the property corresponding to the other reversioner; however, the appellant is bound to fail in the present suit because the unfiled arbitration award operates as a bar under the statutory scheme (Ss. 31–33 of the Arbitration Act), and the appellant did not follow the procedure in the Act to have the award filed or set aside.
  • The Court held that questions regarding validity, effect or existence of an arbitration award must be raised by the procedure provided in the Act (S.33) and not in an independent suit of the present kind.
  • The defendants' failure to rely on the award in the earlier small cause suit did not create a bar (by res judicata or estoppel) to their relying on the arbitration award in the present suit.
  • No new precedent was declared; the Court applied existing provisions of the Arbitration Act and relied on earlier decisions in reaching its conclusion.

Additional procedural note: The judgment concludes with the statement "No leave." and records the dismissal with costs (initials N.R.R. appear on the record).

Show all summary ...

This second appeal arises out of a suit for recovery of possession, which has been dismissed by both the Courts below. The suit was laid on the basis that there was an alienation by a, limited estate holder, in favour of the plaintiff which was quite valid and binding upon the defendant, who happened to be reversioner to the estate. There was, in fact, a small cause suit on a prior occasion by this very plaintiff against this very defendant, who at the time occupied the position of a lessee, for recovery of rent. During the time the small cause suit was pending there was a reference to arbitration, not through Court but outside. The award that resulted from the arbitration declared that the present defendant was a reversioner to the estate of the last maleholder and that the plaintiff had no title to the property, which had been the subject matter of the alienation by the widow of the last maleholder. After the award, curiously enough there was still a decree passed in the small cause suit, apparently because the award was not sought to be relied upon by the defendant in answer to the claim for rent made in that suit. In this suit, which thereafter came to be instituted, questions were raised with reference to the binding character of the alienation in question and also with reference to the maintainability of the suit so far as it craved the relief of injunction against any interference by the defendant with the plaintiff's possession. The latter of the questions depended for its decision upon the fact of the plaintiff's possession on the date of the suit or upon the contrary of it. These questions are questions of fact on which there are concurrent findings, which I do not find myself able to touch in spite of the very able argument of Mr. Parthasarathy for the appellant.

Two interesting questions have been further raised, in the course of the hearing one at the instance of Mr. Parthasarathi for the appellant and the other at the instance of Mr. Suryanarayana for the respondents on both of which questions I must say I have listened to very able and interesting arguments. I have, after a careful consideration of what has been said by Counsel on both sides in regard to both these points come to the conclusion that while the appellant's Counsel is right in his submission that an injunction should have issued, at any rate, with reference to a half of the property in his client's possession, the learned Counsel for the respondent is also right in his contention that it is not open to the present plaintiff to question the validity of the award that was made during the pendency of the small cause suit as above referred to.

The point taken for the appellant with reference to the question of injunction: which I have indicated just now is this: that since it has been found by both the Courts below that the present defendant is only one of two reversioners entitled to the estate of the last maleholder, there is no reason why the plaintiff should be denied any injunction in restraint of any interference by the defendants, at arty rate, with reference to a half of the suit property, which must undoubtedly be regarded as hers by title, defeasible only at the instance of the other reversioner, who has not chosen to impeach it so far and quite valid so long as such an attack by that reversioner has not taken place. It is well settled law that an alienation by a widow is voidable at the instance of the reversioners, and if one of two reversioners has chosen to attack the alienation and succeeded in establishing the ground for an attack, then it is only to the extent of his share of the property that he can succeed, because the rights of the two reversioners are the rights of tenants-in-common and no decree can be passed in favour of one reversioner, who has not chosen to challenge the alienation because of the challenge that has been made to it at the instance of the other reversioner.

While this is the position that I am prepared to accept in favour of the appellant on the argument advanced by his learned Counsel with reference to the question of injunction, I feel greater difficulty, I must say, in accepting the argument advanced by him by way of answer to the point which has been taken by Mr. Suryanarayana for the respondent, that so long as the award stands, unchallengable by the other side, although unfiled, it must be taken to debar the present plaintiff from maintaining his suit. The soundness of the argument of the respondents, or of the reply of the appellant to it really depends upon the effect of Ss. 31 to 33 of the Arbitration Act of 1940. S. 31 provides inter alia that an award may be filed in any Court having jurisdiction in the matter to which the reference relates and also that all questions regarding the validity, effect or existence of an award shall be decided by the Court in which the award has been or may be filed and by no other Court. S. 32 which like S. 33 is even more material to the present discussion, acts as a bar to suits contesting the existence, effect or validity of an award. In the full terms in which it is couched it runs as follows:

“Notwithstanding any law for the time being in force, no suit shall lie on any ground whatever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor-shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act.”

S. 33 provides that,

“Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits.”

The proviso to S. 33 is not material and I therefore do not reproduce it. On these sections there is a recent decision of this Court in Suryanarayana Reddi v. Venkatareddi(1), in which Happell and Govindarajachari, JJ., held that neither these sections nor any other provision of the Indian Arbitration Act precludes a defendant, from putting forward an award which has been fully performed by him, but which was not filed under S. 14 and according to which judgment was not pronounced or a decree given under S. 17 of the Act, in answer to the plaintiff's claim which was the subject matter of the reference and the award. This decision is undoubtedly in favour of the respondents, who is entitled to say on the basis of it that in the present case the unfiled award operates as a bar to the present action. But, says Mr. Parthasarathy for the appellant, the decision in that case presupposed the existence of a valid award, an award of a finished character, as he calls it, which was subjected before it became finished to the procedure provided for by the Act for testing its validity and passing a judgment or decree in accordance with it. He contends that in the present case there was no award of that finished character, as he calls it, which can operate to render the present suit unmaintainable.

The other contention of Mr. Parthasarathi in answer to the decision is that there was the small cause suit, the result of which happened to go in favour of the present plaintiff, because the defendants did not put forward the award in question in answer to that suit. The learned Counsel accordingly contends that it is not open to the defendants in the present case to rely upon the award in question. He also points out that the attitude taken up by the defendants in relation to the award in the small cause suit by not seeking to rely upon it was in fact responsible for his own client not taking any steps so far for getting the award set aside.

To take up first the first answer attempted by the learned Counsel for the appellant, I am of opinion that it was competent to the plaintiff after the award had been passed to take proceedings for getting it filed in Court and afterwards for getting it set aside on any such valid ground as he might have. The appellant did not avail himself of the procedure created by the Act for getting the award set aside and it is not open to him now to dispute the validity of that award in this proceeding. In my opinion, the Indian Arbitration Act, which is a consolidating enactment must be understood, with reference to the sections now under consideration, as requiring that unless a party aggrieved by an award coming within the purview of the Act takes the necessary steps provided by the Act to have the award set aside, it is not competent to him to dispute it in any later proceeding. I am not satisfied that the decision in Suryanarayana Reddi v. Venkatareddi is inapplicable to the present case on the ground that there no question of the invalidity of the award was raised for consideration, whereas in the present case such a case has been actually raised. As I read S. 32, the object of the Legislature in enacting it is that no suit should be allowed to be instituted for a decision upon the existence, effect or validity of an award and no party to an award should be allowed to have it set aside, amended, modified or in any way affected otherwise than as provided in that Act. Mr. Parthasarathi contends that here the suit which his client has instituted is not really a suit for a decision upon the validity of the award and therefore is outside the mischief of the first part of S. 32. Likewise he contends that the suit of his client cannot be regarded as a suit for setting aside, amending or modifying or in any other way affecting the award. It is rather a suit, as he says, by his client for recovering possession by seeking to get away from an award, which he attacks as invalid on its own face, because it proceeded on the basis that there was only one reversioner to the estate, whereas in fact, the record, if examined, would show that there were two persons entitled to the estate as reversioners of whom one no doubt is the present first defendant. This ground of attack against the award is in my opinion, not certainly such as could be raised in the present suit, not having been made the subject matter of any application for challenging its validity as is contemplated by S. 33. That section provides, as I read it, that the validity of the award can only be contested by an application to the Court and not, as is attempted to be done here, by means of an independent suit of the kind with which we are concerned in the present case. That section is obviously mandatory because it says that any party desiring to challenge the validity of an award shall apply to the Court and the Court shall decide the question on affidavits, subject of course to the provision in the proviso for other evidence for the taking of which the Court may pass appropriate orders. The clear implication of the section is that that is the procedure, which must be adopted by any party seeking to question the validity of the award and that it is not competent to any party to the award to question it otherwise.

It is said in this connection by Mr. Parthasarathi that there is a recent decision of this Court in Mathukutty v. Varee Kutti which assists him to get over the trouble created in his way by the decision in Suryanarayana Reddi v. Venkata Reddi(2). The decision in Mathukutty v. Varee Kutti however, on examination is found to deal with the question whether a Court called upon to deal with an application under S. 34 of the Indian Arbitration Act can avoid the necessity of going into the objections on the basis of which the arbitration agreement is attacked by saying that the only procedure for attacking such an arbitration agreement as provided by the Act is the procedure enacted under S. 33. The learned Judge who decided the M.L.J case observes that the very foundation of the jurisdiction of the Court on the application under S. 34 to order stay or not to order stay necessarily depends upon a finding that the Court ought to make with reference to the ground of invalidity that is urged against the arbitration agreement. The learned Judge therefore holds that although the procedure enacted in S. 33 may not have been adopted by a party to the agreement, it will be open to him to make out, by evidence that he is entitled to adduce in connection with the application under S. 34 that the arbitration agreement is either unreal or invalid on account of fraud, misrepresentation or undue influence or the like. The learned Judge holds relying upon a Bombay case decided by Kania J. (as he then was) in Bhagwandas v. Atmasing(3) that the proper view to be taken of S. 34 is that the matter of objections to the arbitration agreement made in answer to the application for stay must be gone into on the application itself. The learned Judge also observes that, if necessary, he would be prepared to treat the memo of objections filed by the party opposing the application for stay as an application of the kind contemplated by S. 33 of the Indian Arbitration Act.

From these remarks that I have made on the decision in the M.L.J case it is apparent that that decision has no application to the case on hand. It is true that in the headnote, as it to be found in the M.L.J report as also in one sentence of the judgment itself, it is stated that S. 33 of the Act gives an independent right to a person, who wishes to challenge the existence or validity of an arbitration agreement or award and to anticipate the other side and to initiate proceedings to have those questions determined beforehand. It does not prohibit the Court acting under S. 34 of the Act from deciding a question, which is raised before it for its decision and the decision on which alone would depend the exercise of its jurisdiction. “The word “award,” which I have underlined in the sentence I have quoted from the headnote and from the body of the judgment may seem to lend some support to the contention of the learned Counsel for the appellant that, if in the case of an arbitration agreement, the right under S. 34 is a right altogether independent of S. 33, there is no reason why in the case of an award also it should not partake of the character of a right independent of S. 33. The substance of the decision of the learned Judge who decided the M.L.J case is however to be understood as being no more and no less than this: that if a party applying for stay under S. 34 is opposed by the other side on the ground that the arbitration agreement itself is invalid, the jurisdiction under S. 34 cannot properly be exercised at all by the Court in which the application for stay is made unless it investigates the grounds of objection taken by the party opposing the application for stay. That being the true state of facts in connection with which the decision in the M.L.J report has to be understood, I have no hesitation in holding that that case cannot be of any assistance to the learned Counsel for the appellant for meeting the point taken for the respondents.

The second line of argument adopted by Mr. Parthasarathi for meeting the argument of the learned Counsel for the respondents is that on account of the conduct of the defendant in the small cause suit, wherein he did not put forward the award at all as an answer to the claim for rent, it would not be open to the defendants to make a point of the fact that the award, although unfiled, is outstanding and is a bar to the present action of the plaintiff. The learned Counsel also urges that an unfiled award is more or less in the nature of a judgment of Court and where there are two decisions of mutual repugnancy, one earlier and the other later, the law of res judicata has it that the two decisions must be treated as cancelling each other and that the matter must be treated as set at large. I am not satisfied that this line of argument can be reasonably accepted, because the decision of the arbitrators, which was rendered outside Court during the pendency of the small cause suit, cannot be strictly likened to a decision of Court, nor am I satisfied that there is any constructive res judicata arising in the way of the first respondent on account of his failure to rely upon the award in the former litigation. The small cause suit was concerned purely with a claim for recovery of rent and it was not decreed with reference to any adjudication on any question of title whether arising on the award, or unconnected with it. No argument of actual or constructive res judicata can in my opinion be built upon what happened in the small cause suit.

In this view of the matter I am clearly of opinion that notwithstanding the argument of the learned Counsel for the appellant on the question whether an injunction may not well issue with reference to the half share of the reversioner other than the first defendant— an argument which I am prepared to accept—the appellant is bound to fail on the point with reference to the bar arising from the award, which has been urged by the learned Counsel for the respondents, in the course of his argument before me.

In the result the second appeal fails and is dismissed with costs.

No leave.

N.R.R