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Sashi Prasad And Others v. Baleshwar Prasad Mandal And Others Opposite Parties.
Structured Summary of the Opinion (H.L. Agrawal, J.)
Factual and Procedural Background
Plaintiffs in representative capacity initiated proceedings in the Court of the Munsif at Bhagalpur seeking to file an award made by the defendants 2nd party and to have that award made a rule of the Court. The dispute concerned the nature of user of plot Nos. 888 and 889 of village Sabour: plaintiffs alleged the plots were used as a playground; defendants 1st party asserted a right of possession based on a settlement with the ex-landlord. This led to earlier proceedings under Sections 107 and 144, Cr.P.C.
The dispute was referred to arbitration and the defendants 2nd party acted as arbitrators. The arbitrators are said to have inspected the land, recorded statements and examined witnesses, and made an award. The plaintiffs’ petition was registered as a regular title suit and treated as a plaint.
Procedural timeline drawn from the opinion:
- 7-2-1963: Defendants Nos. 1 to 3 (defendants first party) entered appearance and filed a petition asserting they had no knowledge of any award and that any award would be illegal and against natural justice; this petition was filed before they were served with notice of the award.
- 3-5-1963: The trial Court ordered issue of notice to defendants 2nd party for filing the award; the award was filed on 27-6-1963.
- 22-7-1963: Defendants 1st party applied to convert the title suit into a miscellaneous case under the Arbitration Act and sought statutory notice and a copy of the award.
- 31-7-1963: The trial Court rejected that application, holding the controversies could be decided only in a title suit; no order was made for issuing notice of the filing of the award.
- 19-11-1963: Defendants 1st party filed a written statement alleging the reference was illegal and void ab initio, alleging arbitrators' misconduct, absence of notice, absence of hearings, collusion, and prayed for supersession of the reference and setting aside of the award.
The learned Additional Munsif framed issues, held the arbitration agreement and award were genuine and valid, and concluded the defendants were not entitled to challenge the award. Nonetheless, while disposing of issues he concluded the defendants' objections on invalidity of the arbitration agreement did not fall under Section 30 of the Arbitration Act and were not barred by limitation. The trial Court decreed the plaintiffs' suit and directed the award dated 21-10-1962 be made a rule of the Court.
The defendants appealed. The Additional Subordinate Judge (appellate court) recorded findings including that (i) the arbitration agreement could not be challenged, (ii) the arbitration agreement was invalid for vagueness, (iii) allegations of arbitrators' misconduct were rejected, and (iv) notice of filing under Section 17 was not issued/served so limitation to contest the award never commenced. Despite finding the award invalid (at least for invalidity of the arbitration agreement), the appellate court held the appeal incompetent under Section 17 because the decree was neither in excess of nor otherwise not in accordance with the award. The defendants brought a second appeal which was allowed to be converted into a Civil Revision before this Court.
Legal Issues Presented
- Whether an appeal is maintainable against a judgment that simultaneously (a) refuses to set aside an award on grounds of invalidity of the arbitration agreement (an objection characterised under Section 33 of the Arbitration Act) and (b) pronounces judgment and a decree according to the award, when Section 17 restricts appeals from decrees in conformity with awards.
- Whether, in circumstances where the trial and appellate Courts have found that the objection to the award is covered by Section 33 (challenge to existence/validity of arbitration agreement), the appellate Court erred in treating the appeal as incompetent under Section 17 and thereby losing jurisdiction to entertain an appeal under Clause (vi) of Section 39(1) of the Arbitration Act.
Arguments of the Parties
Defendants 1st party / Petitioners
- Alleged the reference to arbitrators was illegal and void ab initio and contended fraud induced them to agree to the reference.
- Alleged misconduct by the arbitrators: lack of notice to them, lack of opportunity to be heard, that arbitrators neither held any sitting nor took statements or examined witnesses, and that the award was given in collusion with plaintiffs.
- Before this Court, counsel (Mr. S. B. Sanyal) submitted that the order under appeal was a composite order disposing objections under Section 33 (invalidity of reference) as well as Section 30; he argued that because the trial Court decided the Section 33 objection and yet proceeded to pronounce judgment under Section 17, the defendants were deprived of their right to appeal under Clause (vi) of Section 39 and that the appeal to the appellate court was therefore competent insofar as it attacked the trial Court's determination on Section 33 grounds.
Plaintiffs / Respondents
- The plaintiffs took a preliminary objection before the appellate court challenging the maintainability of the appeal itself (i.e., that the appeal was incompetent because the decree was in conformity with the award and thus not appealable except on limited grounds under Section 17).
- At trial they maintained the arbitration agreement and award were genuine and valid and opposed the defendants' attempts to treat the matter under the Arbitration Act as a miscellaneous proceeding.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Deep (Dip / Deep) Narain Singh v. Mt. Dhaneshwari, AIR 1960 Patna 201 | Distinction between Section 17 and Section 33 of the Arbitration Act; Section 33 covers challenges to existence/validity of arbitration agreement and renders awards made without competent reference void (a nullity). | The Court relied on this decision to support the view that where a party challenges the validity of the arbitration agreement (Section 33), an appeal under Clause (vi) of Section 39(1) is competent even if a decree in terms of the award is also pronounced. |
| Prasad Gope v. Makhan Gope, AIR 1969 Patna 307 | When a judgment contains two parts — a decision on validity of the award and a direction that a decree follow the award — the portion refusing to set aside the award may be appealable; the appealability of that portion is distinct from the limitations of Section 17. | Referenced to show appellate treatment that a judgment containing both a refusal to set aside an award and a decree in accordance with the award can give rise to an appeal under Section 39(1)(vi) in respect of the refusal to set aside the award. |
| Makhan Gope v. Prasad Gope (Civil Review), AIR 1971 Patna 227 | Affirmed that the right of appeal under Section 39 is not extinguished merely because a decree follows under the same judgment; an appeal lies from the part of the judgment refusing to set aside the award and, if allowed, the decree would automatically fall. | The Court relied on this authority to buttress the proposition that even if a decree is pronounced in conformity with an award, the portion of the judgment addressing the validity/existence of the arbitration agreement remains separately appealable under Section 39. |
Court's Reasoning and Analysis
The Court (H.L. Agrawal, J.) set out the relevant statutory framework under the Arbitration Act as presented in the opinion:
- Section 14: procedure for signing and filing an award and the Court's duty to give notice to the parties upon filing.
- Sections 15 and 16: Court's power to modify/correct or remit awards in certain cases.
- Section 30: grounds on which an award may be set aside (limited powers).
- Section 33: permits a person to apply to the Court to challenge the existence or validity of an arbitration agreement or the effect of an award; proceedings may be decided on affidavits, etc.
- Section 17: where an award has not been remitted or set aside, after expiry or refusal of time to set aside the award, the Court shall pronounce judgment according to the award; appeals from such decrees are limited to cases where decree is in excess of or not in accordance with the award.
- Section 39(1)(vi): an appeal lies against an order setting aside or refusing to set aside an award.
Applying those provisions, the Court reasoned as follows:
- The giving of notice upon filing an award (Section 14) is essential before the Court may proceed to pronounce judgment according to the award under Section 17.
- Section 17's limitation on appeals is directed to judgments pronounced strictly in conformity with awards and refers to the grounds enumerated in Section 30 (misconduct and related grounds for setting aside an award).
- Where the core challenge is to the existence or validity of the arbitration agreement itself (a Section 33 challenge), the resulting contention is that there was no valid reference and hence the arbitrators had no jurisdiction; an award produced in such circumstances is a nullity and falls within the scope of an application under Section 33 rather than merely Section 30.
- The appellate court below confined its examination of the appeal's maintainability to Section 17 and therefore treated the appeal as incompetent because the decree was in accordance with the award. The High Court observed that this approach would be correct if the appellant's objections were strictly limited to Section 30 grounds, but in the present case both trial and appellate courts had expressly found that the defendants' objections also fell within Section 33 (invalidity of arbitration agreement).
- Citing the Bench decision in Deep Narain Singh and the decisions in Prasad Gope / Makhan Gope, the Court concluded that when a trial Court refuses to set aside an award on Section 33 grounds but nonetheless pronounces a decree in accordance with the award, the part of the judgment refusing to set aside the award is separately appealable under Section 39(1)(vi). The existence of a decree in terms of the award does not extinguish the right of appeal from that portion of the decision which determines the Section 33 question.
- Because the appellate court below had itself found the arbitration agreement invalid (paragraphs 11 and 19 as cited), its conclusion that the appeal was incompetent under Section 17 was inconsistent with its own findings and constituted an apparent error of jurisdiction.
In short, the Court treated the appealability of the portion of a judgment refusing to set aside an award (Section 33 challenge) as distinct from the limited appeal right against a decree in conformity with an award under Section 17, and held that the appellate court erred by applying Section 17 exclusively when Section 33 issues had been decided against the objector.
Holding and Implications
Holding: Application allowed. The Court held that the appellate court below committed an apparent error in law and jurisdiction by treating the appeal as incompetent under Section 17 despite having found that the defendants' objections were under Section 33 (invalidity of the arbitration agreement). Accordingly, this Court set aside the judgments and decrees of the Courts below.
Direct consequences for the parties:
- The judgment and decree of the trial Court and the appellate Court below have been set aside by this Court.
- The parties were directed to bear their own costs in this Court.
Broader implications: The opinion applies and relies upon earlier Bench decisions (as cited) concerning the distinct scopes of Sections 17 and 33 and the appealability under Section 39(1)(vi). The Court did not purport to create a new precedent beyond applying those authorities; its ruling is grounded in those existing authorities and in the statutory construction summarized above.
H.L Agrawal, J.:— This application in revision has been filed by the defendants 1st party and raises an important question of law.
2. In order to appreciate the question raised before me, it is necessary to state briefly the relevant facts. A proceeding was started in the Court of the Munsif at Bhagalpur by the plaintiffs in representative capacity for filing an award by the defendants 2nd party and making the same a rule of the Court. It appears that some dispute arose between the parties regarding the nature of the user of plot Nos. 888 and 889 of village Sabour. The case of the plaintiffs was that these plots were being used as a play ground by the children of the village and the defendants 1st party wanted to take forcible possession of the same on the basis of some settlement from the ex-landlord. This resulted in proceedings under Sections 107 and 144 of the Code of Criminal procedure between the parties. The dispute was ultimately agreed to be decided by arbitration and the defendants second party were appointed arbitrators and authorised to settle the dispute between them. The further case of the plaintiffs is that the arbitrators made local inspection of the land in dispute in presence of both parties, took down their statements and examined witnesses and after due deliberation gave their award. The petition filed by the plaintiffs was registered as a regular title suit and treated as a plaint. On 7-2-1963, defendants Nos. 1 to 3 (defendants first party) entered appearance and filed a petition stating that they had no knowledge of the award and the award, if any, was illegal and against the principles of natural justice. The above petition was filed by them even before the service of notice upon them. On 3-5-1963, the Court ordered for issue of notice to the defendants 2nd party for filing the award in Court, and the award was actually filed by them on 27-6-1963. It further appears that on 22-7-1963, the defendants first party filed an application in the Court below for converting the title suit as a Miscellaneous case under the Arbitration Act and for issuing the statutory notice to them along with the copy of the award filed by the defendants 2nd party. By order dated the 31st July 1963, the trial Court rejected the objection and held that the controversies between the parties could be gone into only in a title suit. No order was passed for issue of notice of the filing of the award by the arbitrators. Thereafter a written statement was filed by the defendants 1st party on 19-11-1963, which was accepted. The case of the defendants 1st party in their written statement, besides challenging the plaintiffs' case on merits (which is not necessary to be stated for deciding the point involved in this case), was that the alleged reference to the arbitrators was illegal and void ab initio as fraud was practised upon them to agree to such a reference. Various allegations of misconduct by the arbitrators, such as giving of any notice by the arbitrators to them or providing opportunity of being heard were made. It was further alleged that the arbitrators, neither held any sitting nor took any statement of the parties or examined any witness and gave their award in collusion of the plaintiffs. Ultimately a prayer was made that the reference was fit to be superseded and the award fit to be set aside.
3. The learned Additional Munsif framed several issues and decided and disposed of all of them in the judgment itself. He recorded a finding that the arbitration agreement and the award were genuine and valid and the defendants 1st party were not entitled to challenge the award. In paragraph 14 of his judgment, while dealing with the question of limitation in filing the objection by the defendants 1st party to the award, he came to the following conclusion:
“……the defendants did not only challenge the award but they also challenged the arbitration agreement on various grounds. Thus they have challenged the award on the ground of invalidity of arbitration agreement and thus, their objection does not fall under Section 30 of Arbitration Act and as such it is not barred by limitation.”
4. Relying up on a Bench decision of this Court in Dip Narain Singh v. Nosstt Bhuneshwari (AIR 1960 Patna 201), the learned Additional Munsif held that the objections of the defendants first party were under the provisions of Section 33 of the Arbitration Act for which there was no period of limitation. He however, decided all the other issues against the defendants first party and decreed the plaintiffs' suit and directed that the award dated 21-10-1962 be made a rule of the Court. The defendants first party filed an appeal before the learned District Judge, which was heard and disposed of by the Additional Subordinate Judge, Bhagalpur.
5. Before the appellate court a preliminary objection was taken on behalf of the plaintiffs regarding the maintainability of the appeal itself. This question has been disposed of along with the decision of the main appeal itself. It has recorded the following findings:
(i) The arbitration agreement could not be challenged by the defendants 1st party;
(ii) The arbitration agreement (Ext. 4) must be held to be invalid on account of vagueness:
(iii) The entire case regarding the arbitrators misconducting themselves in the proceeding must be rejected:
(iv) Notice of the filing of the award under Section 17 of the Arbitration Act was not issued far less served on the defendants 1st party. Hence limitation for contesting the award never commenced running. Besides, the objection of the defendants 1st party was not under Section 30 of the Arbitration Act so as to attract the rule of one month's limitation, but was covered by Section 33 of the Act for which no period of limitation was prescribed.
6. The learned Additional Subordinate Judge in paragraph 19 of his judgment has come to a definite conclusion that the award in the present case was invalid, if not on any other ground, at least on account of the invalidity of the arbitration agreement itself. But he took the view that the appeal before him itself was incompetent and not maintainable in view of the provisions of Section 17 of the Arbitration Act, as the decree was neither in excess of nor otherwise not in accordance with the award. Against this decision the defendants first party filed a second appeal before this Court which has been allowed to be converted into a Civil Revision.
7. In order to appreciate the question raised before me it is necessary to refer to the relevant provisions of the Arbitration Act. Section 14 of the Act prescribes the procedure for signing an award by the arbitrators or the umpire and filing the same in Court. Under this provision, the arbitrators or the umpires, either at the request of any party to the arbitration agreement or any person claiming under such party, or if so directed by the Court, has to file the award (or assigned copy of it) together with any depositions and documents which might have been taken and proved before them, in Court, and the Court shall thereupon give notice to the parties of the filing of the award. Under Section 15 of the Act the Court has been empowered to order for modification or correction of the award on certain grounds. Under Section 16 of the Act the Court has been empowered to remit back the award or any matter to the arbitrators for re-consideration in certain circumstances. Section 30 of the Act indicates the grounds for setting aside an award by the Court. The powers of the Court are limited and an award can be set aside only on any of the grounds mentioned therein. Apart from the provisions of Section 30, there is yet another section, namely Section 33, which authorises any person to an arbitration agreement desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined to apply to the Court and the Court to decide the question on affidavits, etc. Then comes the most relevant provision for pronouncing the judgment by the Court in terms of the award, namely. Section 17. It lays down that where an award has neither been remitted (under Section 16) nor been set aside (under Section 30 of the Act) the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce the judgment according to the award, and upon the judgment so pronounced, a decree is to follow. Therefore, giving of the notice to the parties of the filing of an award for the purpose of inviting objections as contemplated by Section 14 of the Act referred to above, has been made essential for the Court to proceed to pronounce the judgment according to the award. The right to file an appeal from such a decree, however has been limited under Section 17 of the Act itself, and no appeal from such a decree, except on the grounds that it is in excess of or, not otherwise in accordance with the award, has been made permissible. That is a judgment in conformity with the terms of the award, and not being at variance from such an award neither, being in excess of nor otherwise not in accordance with, the award, is not appealable. It is on this ground that the Additional Subordinate Judge has held that the appeal before him was incompetent although he found that the arbitration agreement was vague and invalid.
8. Section 39 of the Act also makes certain orders passed by the Court under the Act appealable, namely an order—
(i) superseding an arbitration.
(ii) on an award stated in the form of a special case:
(iii) modifying or correcting an award:
(iv) filing or refusing to file an arbitration agreement
(v) Staying or refusing to stay legal proceedings where there is an arbitration agreement; and,
(vi) seating aside or refusing to set aside an award.
9. From Clause (vi) aforesaid, it is clear that an appeal is provided for against an order setting aside or refusing to set aside an award. I have already referred to the provisions of Section 33 of the Act where a party to an arbitration agreement has been permitted to challenge the existence or validity of an award by applying to the Court.
10. It appears that the learned Additional Subordinate Judge has examined the maintainability of the appeal before him only with reference to the provisions of Section 17 of the Act. If that be so his decision is perfectly correct.
11. Mr. S.B Sanyal appearing on Behalf of the petitioners has, however, submitted that on the facts of the present case, the order under appeal before the appellate Court was a composite order where his objection under S. 33 as well as under Section 30 of the Act has been disposed of I have already referred to the findings of the Court below where while considering the question of limitation, it has held that the objection of the petitioners was also under Section 33 of the Act. The grievance of the petitioners, however, is that had the trial Court not simultaneously proceeded to pronounce the judgment according to the award under Section 17 of the Act on deciding the objection under Section 33 of the Act and the petitioners would have been allowed an opportunity to move against the order determining their objection following within the purview of Section 33 of the Act, an appeal under Clause (vi) of Section 39 was certainly competent, and in any view, the appeal before the appellate court was also directed against the decision of the trial Court with respect to the validity of the award on the grounds covered by Section 33 of the Act.
12. The grounds upon which an award can be set aside are provided only under two sections of the Act: firstly, under Section 30 on grounds of misconduct, etc., and, secondly, under Section 33 on grounds of non-existence of or the invalidity of the arbitration agreement itself. In my opinion, an appeal under Section 17 clearly refers to the grounds covered by Section 30 of the Act whereas an appeal under. Clause (vi) of Section 39 of the Act covers an appeal where the Court refuses to set aside an award on the grounds envisaged in Section 33 of the Act, that is there was no valid reference at all and, consequently, the arbitrators had no jurisdiction to give an award. An application, in so far as it asks for a declaration that the award was an illegal and invalid on the ground of invalidity of the reference, can certainly be treated and dealt with as one coming under Section 33 of the Act and as such, against such an order, in my opinion, an appeal under Clause (vi) of Section 39 of the Act is competent. I am supported in my view by a Bench decision of this Court in Deep Narain Singh v. Mt. Dhaneshwari, AIR 1960 Pat 201. In this case the dispute between the parties was referred to five arbitrators without the intervention of the Court. On the arbitrators giving the award, the plaintiffs filed an application under Sections 14 and 17 of the Act for filing of the same in Court and passing a decree in terms thereof. In that case also, the application was registered as a regular title suit and the defendants had filed written statement challenging the existence or validity of the arbitration agreement and also the validity of the award consequent thereto, that is a ground covered by Section 33 of the Act. They had also attacked the validity of the award on various other grounds, such as absence of notice and misconduct etc. covered by Section 30 of the Act. The trial Court had dismissed the suit on the findings that the arbitration agreement and the award were not genuine, valid and legal and that the award was wholly void. A miscellanous appeal was filed in this Court where the question of limitation in filing the objections (written statement) by the defendants to the award and the maintainability of the appeal in the High Court, as in the present case, were taken. The trial Court has referred to this decision while considering the question of limitation and for the reasons given by their Lordships has answered the question of limitation in favour of the petitioners, on the question of maintainability of the appeal in the High Court, the distinction between the scope of the provisions of Section 17 and Section 33 of the Act were discussed at great length and their Lordships came to the conclusion that the scope of both the sections was entirely different. In the case following (sic) under Section 33 of the Act an award has to be set aside for want of a competent reference to the arbitrators in this view, the award being without jurisdiction is rendered illegal and is a nullity and can be ignored altogether.
13. In the case of Prasad Gope v. Makhan Gope, AIR 1969 Pat 307, what had happened was that an award was made by panchas in respect of the disputed property without the intervention of the Court. In that case also the defendants had objected and asked the Court to set aside the award on the ground inter alia that they had not entered into any arbitration, agreement. The trial Court dismissed the suit on this around, but on remand by the appellate Court, the suit was decreed. On an appeal by the defendants the lower appellate Court allowed the appeal and set aside the judgment directing for passing of a decree upon the basis of the award. Thereupon a second appeal was filed. A point was raised in the High Court that in view of the provisions of Section 17, the appeal in the lower appellate Court was not competent. This argument was rejected by Mahapatra, J. (as he then was) on the ground that the judgment of the lower appellate court consisted of two parts one in regard to the question of validity of the award and the other as to whether a decree ought to have followed. Against the decision of Mahapatra, J. a Civil Review was filed on the ground that the second appeal itself which was heard by him was not competent in view of sub-section (2) of Section 39 of the Act. The Civil Review was heard by Untwalia, J. (as he then was) and the said decision is reported in Makhan Gope v. Prasad Gope, AIR 1971 Pat 227. The view of Mahapatra, J. that when in a proceeding or a suit an objection is taken that the award is not valid and should be set aside, and if a decree is directed to be passed in accordance with the award after rejecting the objection, the judgment and order consisted of two parts, and the finding that the order refusing to set aside an award is appealable under Section 39 of the Act was affirmed. The judgment of Mahapatra, J. with respect to the maintainability of the second appeal however, was set aside. Untwalia, J. while allowing the Civil Review has held that merely because a decree follows in accordance with the award on the basis of the same judgment in which the question of setting aside the award has been discussed and answered against the objector, the right of appeal under Section 39 of the Act is not extinguished and an appeal would still be from that portion of the judgment and order by which the Court refused to set aside the award, and if that appeal is allowed, the decree would automatically go.
14. I am in respectful agreement with the views expressed in the above decisions I have quoted the relevant findings of the trial Court as well as of the appellate court where both the Courts have come to the conclusion that the objection of the petitioners was under Section 33 of the Act also. The appellate court in paragraph 11 of its judgment has clearly held that the arbitration agreement itself was invalid on account of vagueness. In paragraph 19 of the judgment, it has further found:
“My view of the matter is that the award in this case was invalid if not on account of the arbitrators misconducting themselves or the proceeding, at least on account of invalidity of the arbitration agreement itself.”
15. In view of the discussions made above and the clear findings recorded by the Court of appeal below, the learned Additional Subordinate Judge has committed an apparent error in holding that the appeal was incompetent as it was neither in excess of nor otherwise not in accordance with the award. It is therefore, difficult to uphold the view of the court of appeal below which, in my opinion, is contrary to its own findings. It has completely overlooked the provision of clause (vi) of Section 39(1) of the Act Since the Court of appeal below has committed an apparent error of jurisdiction, in my opinion, this court in Civil Revision is competent to interfere in the circumstances enumerated above.
16. Learned counsel appearing for the opposite party No. 2 could not challenge the finding of the Court of appeal below with respect to the invalidity of the arbitration agreement, and in view of that finding, the Court of appeal below, in my opinion, has committed an apparent error in refusing to exercise its Appellate jurisdiction under an erroneous impression regarding the non-maintainability of the appeal before it. I would, accordingly, allow this application and set aside the judgment and decree of the Courts below. In the circumstances of the present case, however, I would direct the parties to bear their own costs, in this Court also.
17. Application allowed.
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