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Gaddipati Laxminarayana v. Gogineni Venkatasubbaiah And Others
Factual and Procedural Background
These revisions were preferred against the order of the Subordinate Judge, Tenali, which arose from Civil Miscellaneous Appeals filed against the order of the District Munsif, Tenali, in O.P. Nos. 10, 11 and 12 of 1952. Those original petitions were filed under Sections 30 and 33 of the Indian Arbitration Act.
The factual matrix common to the three petitions involved a transferee, Gangineni Anjaiah, who obtained decrees for possession (one decree from O.S. No. 156 of 1938) and in other instances decrees for possession with mesne profits. On attempts to execute those decrees the matters in dispute during execution were referred to arbitration. Arbitrators made awards declaring that the decrees being executed had been satisfied. Objections were filed to those awards and applications were brought to set aside the awards (O.P. Nos. 10–12 of 1952).
The District Munsif set aside the awards on the sole ground that matters in execution proceedings could not properly be referred to arbitration and that the arbitrators therefore lacked jurisdiction. Miscellaneous appeals were preferred to the Subordinate Judge, who disagreed with the trial Court and held the references valid; he further held that if references in execution proceedings were not permitted by law, the awards could still be treated as compromises or adjustments of the disputes. The appeals were allowed by that Court and the lower Court's order set aside. Revisions were then filed challenging that appellate judgment; this opinion is the decision on those revisions.
Legal Issues Presented
- Whether matters arising in execution proceedings can be validly referred to arbitration under Section 21 of the Arbitration Act (i.e., whether "suit" in that provision includes execution proceedings).
- Whether an arbitration award obtained on a reference arising from execution proceedings can be treated as an adjustment or compromise of the underlying decree under the Civil Procedure Code (for example O. 21, R. 2 or O. 23, R. 3, C.P.C.) and/or Section 47 of the Arbitration Act, in the absence of subsequent consent of all the parties to treat the award as such.
Arguments of the Parties
Petitioners' Arguments
- Section 21 of the Arbitration Act clearly confines references to "matters in difference" in a suit; execution proceedings are not part of a suit and therefore cannot be referred to arbitration.
- An award made on an invalid reference (i.e., a reference in execution proceedings) cannot be relied upon as an adjustment or compromise of the decree where there is no consent of one of the parties to treat the award as such. In other words, an award cannot be converted into a compromise/adjustment without the consent required by Section 47's proviso.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Thakur Pershad v. Fakhirulla, 22 Ind App 44 | Interpreting scope of provisions equivalent to S.141, C.P.C.; held that proceedings referred to by that section are miscellaneous proceedings (original in character) and do not include execution proceedings. | Relied upon to show that proceedings in execution are not included within the expression "miscellaneous proceedings" or "suit" for the purpose of permitting reference to arbitration; supports the conclusion that execution proceedings cannot be referred to arbitration. |
| Moradhwaj v. Bhudar Das, 1955 All LJ 96; (AIR 1955 All 353) | Part of the trend of decisions holding that a valid reference in a pending suit followed by an award operates as an adjustment of the suit (under S.89 and Schedule II of the C.P.C. in earlier law). | Cited as reflecting the trend in certain High Courts (Allahabad, Patna) that awards from valid references may operate as adjustments; the Court noted these decisions when reviewing the conflict of authority and the effect of Section 47 of the Arbitration Act. |
| Raghunandan Rai v. Shuklal Rai, AIR 1952 Pat 258 | Another decision in the trend supporting the view that awards from references in suits could operate as adjustments. | Placed on the side of authorities that treated awards from valid references as capable of operating as adjustments; used in the Court's survey of conflicting precedents. |
| Subbaraju v. Venkatarama Raju, ILR 51 Mad 800; (AIR 1928 Mad 1025) (Full Bench) | Full Bench view that where parties refer matters to arbitration and an award is made, a decree in terms of the award could be passed under O.23, R.3, C.P.C. even if the parties do not accept the award; implied that an award could be given effect without subsequent consent. | Discussed as an important Madras precedent historically relied on to treat awards as enforceable by decree; the Court reviewed this decision in the context of later statutory developments and subsequent Madras decisions. |
| Arumuga Mudaliar v. Balasubramania Mudaliar, ILR 1946 Mad 39; (AIR 1945 Mad 294) | Held that an agreement to accept a future award could be treated as a compromise in the suit; treated antecedent consent as sufficient to take the award as a compromise under the then applicable provisions. | Noted as a decision that treated antecedent consent to accept an award as enough to satisfy the proviso (prior to the Arbitration Act's later express language); the Court considered and distinguished this approach from the view it ultimately adopts under Section 47. |
| Palaniandi Chetty v. Kannappa Gowndan, AIR 1951 Mad 281 | Considered the correctness of Arumuga Mudaliar; the Judge expressed doubts but felt bound by the earlier bench judgment. | Referred to in assessing the internal precedential conflict within the Madras High Court on whether antecedent consent sufficed to treat an award as an adjustment; showed judicial uncertainty prior to the Full Bench decision. |
| Abdul Rahman v. Mohammed Siddiq, ILR 1953 Mad 677; (AIR 1953 Mad 781) (Full Bench) | Interpreted proviso to Section 47 of the Arbitration Act to hold that the consent referred to must be something other than mere consent to refer the dispute to arbitration — i.e., subsequent or separate consent to treat the award as an adjustment is required. | Treated as binding on the present Court; the judgment was followed to hold that the proviso requires consent distinct from the antecedent consent to refer, and that an award is capable of operating as an adjustment only where the award is agreed to after it is given. |
Court's Reasoning and Analysis
The Court addressed the matter in two principal stages: first, whether execution proceedings fall within the scope of Section 21 of the Arbitration Act (i.e., whether "suit" can be taken to include execution proceedings); and second, whether, even if such a reference were invalid, an award could nevertheless be treated as an adjustment or compromise of the suit under Section 47 of the Arbitration Act together with the relevant provisions of the Civil Procedure Code.
On the first issue the Court examined the statutory language of Section 21 of the Arbitration Act and the corresponding provisions in the Civil Procedure Code (notably Schedule II and Section 141, C.P.C.). It explained that ordinarily "suit" denotes a civil proceeding initiated by the presentation of a plaint and that Section 141 (and its antecedent provisions in earlier Codes) dealt with miscellaneous proceedings that are original in character (for example, probate or succession certificate proceedings) and not execution proceedings. The Court relied on earlier authority (Thakur Pershad) and the Privy Council’s exposition to conclude that execution proceedings are distinct and are not included within the expression "suit" for these purposes. The Court emphasized the conceptual distinction: proceedings in a suit terminate in a decree, while execution proceedings concern enforcement of that decree and are separate and self-contained under the Code.
Having concluded that proceedings in execution cannot be the subject of reference to arbitration, the Court turned to the second issue: whether an award obtained in execution proceedings could nonetheless be treated as an adjustment or compromise of the decree. The Court examined Section 47 of the Arbitration Act, which contains a proviso permitting an arbitration award "with the consent of all the parties interested" to be taken into consideration as a compromise or adjustment of a suit.
The Court read the proviso strictly: the consent required is not merely the antecedent consent to refer the dispute to arbitration but rather a consent to treat the award as an adjustment when the award is presented for consideration. The consent must be contemporaneous with (or subsequent to) the award and must be a clear agreement by all interested parties to treat the award as a compromise/adjustment; mere prior agreement to refer will not meet the proviso's requirement. The Court characterized this consent as a sine qua non before a court may act on an award by recording it as an adjustment or compromise under the relevant provisions of the Civil Procedure Code.
The opinion surveyed conflicting decisions across jurisdictions (Bombay, Allahabad, Madras on one side; Calcutta and Lahore on the other) and explained that the express words of Section 47 resolve that conflict by requiring post-award consent for an award to be treated as a compromise. The Court specifically relied on the Full Bench decision in Abdul Rahman v. Mohammed Siddiq (Madras), which held that the consent referred to in Section 47 must be something other than the consent to refer the dispute to arbitration. That Full Bench decision was treated as binding and decisive on the point for the present Court.
Applying the foregoing analysis to the facts, the Court concluded that references arising in execution proceedings were not maintainable and that, further, awards could not be treated as adjustments in the absence of the requisite consent of all interested parties at the time the award was considered.
Holding and Implications
Holding: The revisions were allowed with costs throughout. Revisions allowed.
Implications:
- The Court held as a matter of law that proceedings in execution are not proceedings "in a suit" for the purposes of Section 21 of the Arbitration Act and therefore cannot be validly referred to arbitration under that provision.
- The Court held that an arbitration award may be treated as an adjustment or compromise of a suit under the proviso to Section 47 of the Arbitration Act only where all parties interested expressly consent to take the award into consideration as a compromise or adjustment when the award is presented for consideration; antecedent consent to refer the dispute to arbitration is insufficient.
- The opinion relied upon and followed the Full Bench decision in Abdul Rahman v. Mohammed Siddiq as binding authority on the consent requirement in Section 47, thereby resolving the earlier conflict of decisions on this point (as described in the opinion).
- Direct practical effect stated in the opinion: the revisions were allowed with costs throughout. The opinion did not purport to set out any further new procedural steps beyond that outcome in the text of the judgment.
Judgement
SRINIVASACHARI, J. : -
These revisions have been preferred against the order of the Subordinate Judge, Tenali, passed in Civil Miscellaneous Appeals filed before him against the order of the District Munsif, Tenali, in O. P. Nos. 10 of 1952, 11 of 1952 and 12 of 1952 filed before him under Ss. 30 and 33 of the Indian Arbitration Act.
2. One Gangineni Anjaiah obtained a transfer of a decree for possession passed in O. S. No. 156 of 1938, and sought to execute the decree. The transfer was recognised. Later the matter relating to the execution of the decree was preferred to arbitration. The arbitrators gave an award. Objections were raised to the award and an application was filed to set aside the award. This was the subject-matter of O. P. No. 11 of 1952.
3. The same Gangineni Anjaiah obtained a decree for possession and for mesne profits and proceeded to execute the decree, when the parties referred the matters in dispute to arbitration. An award was given which is sought to be set aside. O. P. No. 10 of 1952 relates to this matter.
4. The third O. P. No. 12 of 1952 was filed to set aside an award passed which was also passed on a reference made to arbitration of matters in dispute in execution proceedings initiated by the transferee of the decree and going on, relating to a decree for possession and mesne profits.
5. In all the above matters, the arbitrators passed awards declaring that the decrees which were being executed had been satisfied. These awards were attacked inter-alia on the ground that matters in execution proceedings could not be referred to arbitration and the arbitrators having had no jurisdiction to hear these disputes, their awards were liable to be set aside. The District Munsif upheld this contention and on this sole ground set aside the awards.
The aggrieved parties filed miscellaneous appeals and the appellate Court differed from the trial Court and held that the reference was valid, and allowed by law. He further held that if for any reason the reference to arbitration of matters in execution proceedings was not allowed by law, such reference was validated by the award being treated as a compromise or adjustment of the dispute between the parties. The appeals were allowed and the order of the lower Court set aside. Revisions have been filed against the above judgment.
6. Learned counsel appearing for the petitioners argues that the provisions of S. 21 of the Arbitration Act were clear that only matters relating to suit could be referred to arbitration and execution proceedings could never be regarded as partaking of the nature of a suit. As regards the second ground relied upon by the lower Court, learned counsel contends that an award passed on an invalid reference could not be relied upon as an adjustment or compromise where there is no consent of one of the parties to such an award.
7. Section 21 of the Arbitration Act, which governs this case makes provision for making references to arbitration in pending suits. It reads as follows :
"Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration, they may at any time before judgment is pronounced apply in writing to the Court for an order of reference."
This section in substance reproduces paragraph (1) of Sch. II of the Civil Procedure Code. The significance and the import of the words in the suit has been the subject of judicial discussion. Generally by suit is meant a civil proceeding initiated by the presentation of plaint. The word suit has been held to include an appeal as it is only a continuation of suit. The question has arisen with reference to S. 141, C. P. C., as to what proceedings could be regarded as miscellaneous proceedings within the meaning of that Section. Section 141 reads as follows :
"The procedure provided in this Code in regard to suits shall be followed, as far as it can be made applicable, in all proceedings in any Court of Civil jurisdiction."
That Section as would be clear from its wording speaks only of miscellaneous proceedings, proceedings other than a regular suit. It is now settled that the proceedings referred to in S. 141 though not partaking of the nature of a suit are proceedings, original in character such as proceedings initiated for the grant of probate, succession certificate and similar proceedings. Vide Thakur Pershad v. Fakhirulla, 22 Ind App 44 (A).
The question as to whether by force of S. 141, C. P. C., proceedings in execution could not be regarded as coming within the category of a suit came up for consideration before the Privy Council in the same case. The question arose under S. 647 of the Code of 1882 which reads as follows :
"The procedure herein prescribed shall be followed so far as it can be made applicable in all proceedings in any court of civil jurisdiction other than suits and appeals."
There was a conflict of view as to whether proceedings in execution could be regarded as proceedings other than suits or appeals coming within s. 647 of act xiv of 1882. The Privy Council observed in the above case that the proceedings spoken of in S. 647 did not include execution proceedings. When the matter was before their Lordships an explanation to the above section was added which specifically said that the section did not apply to application for the execution of decrees.
The addition of the explanation according to their Lordships did not make any difference, and their Lordships expressed the view that the amendment merely expressed the true meaning of the Civil Procedure Code. It is clear that S. 141, C. P. C., would not include proceedings in execution.
8. Looked at from another point of view also proceedings in a suit cannot include proceedings in execution, for a suit embraces all proceedings which terminate in a decree and the proceedings relating to the enforcement of the decree are proceedings which are quite different and distinct from proceedings in the suit itself.
9. Under Schedule II of the Code of Civil Procedure which related to arbitrations, which substantially corresponded to S. 21 of the Arbitration Act, Act X of 1940, it was always held that matters of dispute arising in proceedings in execution could not be referred to arbitration. Under the Civil Procedure Code, provisions relating to suits are not applicable to all proceedings. The chapter relating to execution proceedings is self-contained.
We, are, therefore, of the opinion that proceedings in execution cannot be the subject of reference to arbitration. Broadly speaking any relief which a Civil Court is competent to grant and which is enforceable by a suit may be granted by the arbitrators. 10. The next point to be considered is whether an award obtained in execution proceedings could be regarded as operating as an adjustment of the decree falling under O. 21, R. 2 or a compromise coming under O. 23, R. 3, C. P. C. The relevant provision of the arbitration act which may be regarded as lending support to this view is S. 47 of the Arbitration Act which reads as follows :
"Subject to the provisions of S. 46 and save in so far as is otherwise provided by any law for the time being in force, the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder :
Provided that an arbitration award otherwise obtained may with the consent of all the parties interested be taken into consideration as a compromise or adjustment of a suit by any Court before which the suit is pending."
The proviso makes it clear that the award may be regarded as a compromise or adjustment of a suit if all the parties interested consent to the award. The consent that is required is consent at the time when the award comes up for consideration; the fact that originally the reference to arbitration was made by consent of the parties interested would not satisfy the requirements of the proviso.
The consent referred to in the proviso must be something other than the consent to refer the matter to arbitration in order that the award may be taken into consideration as a compromise or an adjustment of a suit. It must be acquiesced in or agreed to to be treated as an adjustment. The consent of all interested parties is a sine qua non to acting upon the award and recording it as a compromise or adjustment of the matter in dispute.
11. There was, however, a conflict of decisions between Bombay, Allahabad and Madras High Courts on the one hand and Calcutta and Lahore on the other. The Bombay and the other Courts holding the same view held that a valid reference in a pending suit followed by an award operated as an adjustment of the suit while the Calcutta High Court held a contrary view. These were cases under S. 89 and Schedule II of the Civil Procedure Code. But after the Arbitration Act, the conflict ceases to have any importance in the face of the express words in S. 47 of the Act.
That the trend of decisions has been only to this effect would be clear from the decisions of the Allahabad High Court and Patna High Court in Moradhwaj v. Bhudar Das, 1955 All LJ 96 : ((S) AIR 1955 All 353) (FB) (B) and Raghunandan Rai v. Shuklal Rai, AIR 1952 Pat 258 (C). So far as the Madras High Court is concerned the first case that deals with this matter was Full Bench case of Subbaraju v. Venkatarama Raju, ILR 51 Mad 800 : (AIR 1928 Mad 1025) (D).
This was a case which arose before the Arbitration Act of 1940 was passed. In this case the Full Bench was of the opinion that where the parties referred the matters in dispute to arbitration and an award is made a decree in terms of the award could be passed by the Court under O. 23, R. 3, C. P. C., though the parties do not accept the award. Philips J., who delivered the judgment of the bench observed :
"If, however, the award satisfies the provisions of O. 23, R. 3, C. P. C., there is no provision in the Civil Procedure Code which expressly takes away the rights of the parties to proceed in accordance with the section."
Later, after the Arbitration Act came into force the matter was considered in the case of Arumuga Mudaliar v. Balasubramania Mudaliar, ILR 1946 Mad 39 : (AIR 1945 Mad 294) (E). Leach C. J., relying on the above Full Bench Judgment held that an agreement to accept a future award could be treated as a compromise in the suit. The antecedent consent was regarded as enough consent for the purposes of the proviso to S. 47 of the Arbitration Act.
Later on, Viswanatha Sastry J., had occasion to consider the same matter in Palaniandi Chetty v. Kannappa Gowndan, AIR 1951 Mad 281 (F), and the learned Judge felt doubtful about the correctness of the decision in the previous case viz.; ILR 1946 Mad 39 : (AIR 1945 Mad 294) (E), but felt that he was bound by the bench judgment. The conflict, if any, so far as the Madras High Court is concerned has been set at rest by the Full Bench decision in Abdul Rahman v. Mohammed Siddiq, ILR 1953 Mad 677 : (AIR 1953 Mad 781) (G), Venkatarama Iyer J., who delivered the Full Bench judgment while interpreting the proviso to S. 47 of the Arbitration Act observed in these terms :
"The consent here referred to must be something other than the consent to refer the dispute to arbitration"
and expressed the opinion that the views expressed in ILR 1946 Mad 39 : (AIR 1945 Mad 294) (E), did not give sufficient weight to the words with the consent of all the parties interested. This judgment is binding upon us. Obviously the consent required under the proviso is the consent to take the award into consideration for purposes of recording an adjustment. If the award is agreed to after it is given it operates as an adjustment.
12. The result is that these revisions must be allowed with costs throughout.
Revisions allowed.
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