Jagjit Singh, J.:— On February 6, 1963, Shri R.L Sehgal, Commercial Subordinate Judge First Class, Delhi, ordered an award dated September 20/1960 to be made the rule of the Court. Accordingly in terms of the award a decree was passed for Rs. 10,513.75, including Rs. 513.75 on account of costs of arbitration proceedings, in favour Of Messrs Naaz Cinema and against Messrs Madhubala Private Limited. This appeal is against the order and decree of the Subordinate Judge. On March 18, 1960 there was an agreement between Messrs Madhubala Private Limited,. Delhi, and Messrs Naaz Cinema, New Delhi. Messrs Madhubala Private Limited are producers and distributors of cinematograph films and have hereinafter been referred to as “the distributors”. Messrs Naaz Cinema is a firm registered under the Indian Partnership Act and is an exhibitor of cinematograph films. For facility of reference they are called hereinafter as “the exhibitors”. The agreement between the distributors and the exhibitors provided for the former supplying to the latter a cinematograph film called “Mehlon-Ke-Khwab” on certain terms, from March 25, 1960. The picture was to be released simultaneously in Nazz and Golcha cinemas and. the exhibitors were required to give 28 shows per week for a minimum period of two weeks. Clause 7 of the agreement also provided for referring any dispute that may arise to arbitration and was iff the following terms:—
“That in case of dispute arising out of this agreement it shall be referred to the Motion Pictures Association, the decision of the same will be binding on both the parties.”
2. The distributors did not supply the prints of the picture to the exhibitors and, therefore its release in Naaz Cinema from March, 25, 1960 had to be postponed. This led to a dispute between the exhibitors and the distributors. After some correspondence passed between then the exhibitors, on April 11, 1960 made a reference for arbitration to the Motion Pictures Association, Delhi.
3. The Motion Pictures Association appointed Sarvshri L.D Desai and Harbans Singh to act as aribitrators. The said arbitrators made an award on. April. 14, 1960 which provided that the distributors shall supply their picture “Mehlon-Ke-Khwab” to the exhibitors for simultaneous release in Naaz and Golcha cinemas from April 15, 1960 or if the release was postponed from that date for any reason whatsoever then from any other date.
4. The distributors even failed to comply with the terms of the award dated April 14, 1960. The prints of the picture were only supplied by them to Golcha cinema and not to the exhibitors. There could, therefore be no release of the picture in Naaz Cinema simultaneously with its release in Golcha cinema. On April 27, 1960 the exhibitors made another reference to the Motion Pictures Association, for Aribtration, claiming Rs. 50,000/- as damages for “loss of business, goodwill and reputation” on the allegation that the distributors had dishonestly only released the picture in Golcha cinema from April 13, 1960.
5. Once again Sarvshri L D. Desai and Harbans Singh were asked to act as arbitrators by the Motion Pictures Association. Later on Shri Desai was substituted by Shri Jagan Nath Pershad On September 20, 1960 Savshri Jagan Nath Pershad and Harbans Singh made an award the operative part of which was as under:—
We award that Messrs. Madhubala Private Ltd., Delhi shall pay a sum of Rs. 10,000/- only to Messrs, Naaz Cinema, New Delhi alongwith a sum of Rs. 513.75 Np. only by way of costs of arbitration and award within a period of 30 days, from the date of the award in full and final settlement of their claim under reference.”
6. The exhibitors applied for the award dated September 20, 1960 being made a rule of the court, while the distributors raised various objections one of which was that the reference by the exhibitors bsing unilateral the resulting award was illegal. Objections were as well taken to the earlier reference dated April 11, 1960 and the award dated April 14, 1960.
7. The learned Commercial Subordinate Judge framed many issues in the case. So far as the issues relating to the reference dated April 11, 1960 and the award dated April 14, 1960 it was held by him that these could not be gone into in the proceedings before him. The reference made by the exhibitors on April 27, 1960 and the award dated September 20, 1960 were found to be in no way illegal. The said award was, therefore, made a rule of the court and a decree in terms thereof was passed.
8. The only matter urged before us by Shri Ramchandra Rao, learned counsel for the appellants, was that the reference nude by the exhibitors on April 27, 1960 being a unilateral one and the appellant not having assented to the terms of the reference the arbitrators did not come to be vested with the necessary jurisdiction and therefore, the award made by them was a nullity and it could not be made rule of the court.
9. This was not disputed by Shri Daya Krishna, learned counsel for the respondents, that the reference dated April 27, 1960 was only made by the exhibitors. The record of proceedings before the arbitrators, which was filed in the court of the Commercial Subordinate Judge, also shows that the reference on which arbitration proceedings were started was a unilateral one. Shri Daya Krishna, however. contended that the Managing Director of the distributors appeared before the arbitrators on July 26, 1960 for making a statement and thus the distributors submitted to the jurisdiction of the arbitrators and that it was not open to them to challenge the validity of the award by urging that both sides had not assented to the reference.
10. On July 26, 1960 Shri A.C Saxena, Manager of the exhibitors, filed before the arbitrators a revised statement of calculations in support of their claim for Rs. 50,000/- by way of damages. On the same date Shri Khan Atta Ullaha Khan, Managing Director of the distributors, also made a statement refuting the claim made from the other side. He also closed the evidence on behalf of the distributors. On July 29, 1960, however, the producers sent a letter to the arbitrators in which a plea was specifically taken that no reference to arbitration could be made “on a unilateral complaint from a member”. The arbitrators were also requested to “suspend further proceedings, ignore the complaint of Naaz Cinema and abstain from making any award or taking any step in relation to the alleged reference,’. The arbitrators without, taking any notice of the letter of the distributors made the impugned award on September 20, 1960.
11. Shri Daya Krishna relied upon certain cases in support of his contention that consent of the distributors to the making of the reference can be inferred from the act of the Managing Director in appearing before the arbitrators on July 26, 1960 and making his statement.
12. In the case of Union of India v. K.P Mandal . A.I.R 1958 Cal 415.3. the relevant facts were that an arbitration clause in a contract with the Government of India for execution of certain work provided that except where otherwise provided in the contract all questions and disputes arising out of or relating to the contract were to be referred to the arbitration of the “Superintending Engineer of the Circle for the time being”. Disputes arose and were referred to an arbitrator who was not competent to act as an arbitrator according to the qualifications prescribed by arbitration clause. The contractor not only submitted to the arbitration of the person appointed to act as arbitrator but also put forward a counterclaim against the Government for adjudication by the same arbitrator took part in the proceedings from the beginning to the end, agreed to extension of time for filing the award and only when the award went against him sought to set aside the award on the ground that the arbitrator was not compenent to act in that capacity. It was on those facts that Chief Justice Chakravartti held that the rule of estoppel bound the contractor and prevened him from contending that the arbitrator was not qualified under the terms of the agreement to arbitrate in the dispute. Obviously the facts of that case are distinguishable as in the present case the distributors even before the award was made asked the arbitrators not to proceed with the making of the award as the reference before them was a unilateral one. Similarly no assistance can he derived by the learned counsel for the respondents from the case of Union of India v. Ch. Radhanath Nanda . A.I.R 196 Orissa 143.. In that case the parties had participated in the proceedings before the arbitrator and what was held by the Orissa High Court was that any of the parties could not subsequently challenge the arbitrator's jurisdiction on the ground that he did not possess the qualifications required by the arbitration clause.
13. In the of Pioneer Engineering Works, v. Union of India3 also referred to by Shri Daya Krishna, a division bench of the Patna High Court observed that it is well settled that a court will not permit any of the parties to act in such a way as to obtain benefit of an award if it is in his favour and, endeavour to set it aside if it is not. So far as the present appellants are concerred it cannot be said they wanted to obtain the benefit of the award if it was in their favour. As mentioned above before making the award the arbitrators were told not to proceed with the referrence. This case is, therefore, equally unhelpful. The case of Delhi Vanaspati Syndicate v. Bhagwan Das Faquir Chand . 1971 R.L.R 472, sought to be relied upon, did not relate to arbitration proceedings.
14. From the facts of the present case it cannot be said that the appellants had assented to the terms of the reference. When the Managing Director of the producers appeared he did not say a word about his giving consent to the terms of the reference and before the award was made the producers sent a letter requesting the arbitrators not to proceed with the arbitration proceedings
15. In the case of Thawards Pherumal v. Union of India . AIR 1965 S.C 408 the Supreme Court made the following observations:—
“A reference requires the assent of ‘Both’ sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred, then recourse must be had to the Court under section 20 of the Act and the recalcitrant party can then be compelled to submit the matter under sub-section (4).
In the absence of either, agreement by ‘both’ sides about the terms of reference, or an order of the Court under Section 20(4) compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction.
Therefore, when a question of law is the point at issue, unless ‘both’ sides ‘specifically’ agree to refer it and a fee to be bound by the arbitrator's decision, the jurisdiction of the Courts to set an arbitration right when the error is apparent on the face of the award is not ousted. The mere fact that both parties submit incidental arguments about a point of law in the course of the proceedings is not enough.
16. Recently a Full Bench of this Court had an occasion to consider whether the above reproduced observations of their Lordships of the Supreme Court were applicable in respect of all arbirations or were confined to an arbitration only with reference to a question of law. The Full Bench held that the observation of the Supreme Court covered cases not only of reference of a question of law to arbitration but of all references to arbitration. The last paragraph in the quotation given above was stated to be only an application of the general ‘observations in the previous two paragraphs to a question of law which was sought to be raised in the case before the Supreme Court. The Full Bench also held that the existence of an agreement to submit a given matter to an arbitration is not enough to make a reference to arbitration a valid reference unless both sides have assented to the reference at the time when the reference is to be made” and that in the absence of a reference of the dispute by both parties approach to the court under section 20 of the Arbitration Act is “a must”. It was further clarified that where a contract between the parties contains what may be called an arbitration clause to refer future disputes to arbitration and such a dispute arises then a reference has to be made to arbitration within the meaning of section 2(e) of the Arbitration Act and at that stage ‘there should be a consent of both the parties’. The reference to arbitration having unilaterally been made by the exhibitors alone and no consent to the terms of the reference having been given by the other side the reference was not competent without recourse to the provisions of section 20(4) of the Arbitration Act for compelling the recalcitrant party to submit to the arbitration proceedings. The arbitrators appointed by the Motion Pictures Association had no jurisdiction to arbitrate on the dispute on a unilateral reference made by one of the parties. The award made was illegal and could not be made a rule of the court. The view taken by the learned Subordi-nate Judge, in our opinion, was not legally justified.
17. The appeal is, therefore, accepted and the order and decree dated February 6, 1963 of the Commercial Subordinate Judge in favour of the exhibitors (Messrs Naaz Cinema) are set aside. In the circumstances of the case the parties are left to bear their own costs throughout.
18. Appeal accepted.