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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • D.B Desai, with Messrs Eastley, Lam & Co., for the applicant.
  • G.N Thakor, with B.G Thakor, and Messrs Gagrat & Co., for the opponent.
Judges
  • Mr. Divatia, J.
Acts
  • rules in schedule II of the Civil Procedure Code
  • provisions of Ch. IV of the Arbitration Act,
  • ARBITRATION ACT 1940
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • D.B Desai, with Messrs Eastley, Lam & Co., for the applicant.
  • G.N Thakor, with B.G Thakor, and Messrs Gagrat & Co., for the opponent.
Judges
  • Mr. Divatia, J.
Acts
  • rules in schedule II of the Civil Procedure Code
  • provisions of Ch. IV of the Arbitration Act,
  • ARBITRATION ACT 1940
See more information ...
Smart Summary

Case Summary — Opinion of Divatia, J.

Factual and Procedural Background

This revisional application was filed by the plaintiff challenging an order of Mr. Lalkaka, Small Cause Court Judge at Bombay. The plaintiff had instituted suit No. 170 of 1944 for ejectment against the opponent, alleging that the opponent was his sub-tenant of premises situated at Gowalia Tank Road and that the plaintiff required possession for his own use.

Procedural history and key events as set out in the opinion:

  • First hearing took place on 27 January. According to the plaintiff, the opponent's counsel suggested an inspection of the premises on 9 February; the judge inspected on that date and adjourned hearing to 11 February.
  • On 11 February the parties (according to the plaintiff) agreed that the judge should decide the matters as an arbitrator; the judge suggested conditions under which he would pass a decree in the petitioner's favour if the petitioner found alternate premises for the opponent before 30 March with rent not exceeding Rs. 25 per month. The parties accepted that suggestion; no evidence was recorded and the matter was adjourned to 30 March.
  • The plaintiff searched for premises but the opponent did not approve them. On 30 March the matter was adjourned without evidence; on 31 March the opponent's counsel stated none of the proposed premises were suitable and the judge dismissed the petitioner's suit immediately.
  • The opponent's account in an affidavit before the revisional court differed in chronology and framed the judge's role as deciding the matter summarily "as arbitrator" after inspection and hearing counsel; according to that affidavit the initial suggestion for summary decision occurred on 27 January and both advocates consented then.

Legal Issues Presented

  1. Whether the learned Small Cause Court Judge, having been asked to "decide ... summarily as arbitrator", acted as a pure arbitrator governed by the Arbitration Act, 1940 (with the attendant requirement of a written reference and the Chapter IV formalities), or whether he remained the Court whose decision the parties agreed to accept as final (a "quasi-arbitrator").
  2. Whether, if the judge acted as a pure arbitrator under the Arbitration Act, the judge had jurisdiction to pass the order dismissing the petitioner's suit without complying with the statutory formalities applicable to arbitrations in suits (including the requirement of a written application under Chapter IV).
  3. Whether the words "as arbitrator" in the judge's order converted the proceedings into an arbitration governed by the Arbitration Act, 1940, with the consequences flowing from that characterization (e.g., applicability of Chapter IV and related rules).

Arguments of the Parties

Appellant (Plaintiff) — Mr. D.B. Desai

  • The learned Judge had no jurisdiction to pass the order because he acted as an arbitrator and the Arbitration Act, 1940 governs such arbitration.
  • Under the Arbitration Act (relying on ss. 2(c), 21 and 40 and s. 47), a reference to arbitration in a suit must be by written application and Chapter IV procedures apply; those procedures envisage an arbitrator other than the Court judge.
  • The Small Cause Court cannot itself pass a decree or order upon an award (the contention was that only the High Court can convert an award into a decree), and therefore the judge's order was beyond his jurisdiction if he was acting under the Arbitration Act.

Respondent (Opponent) — Mr. Thakor

  • Although the judge used the phrase "as arbitrator", the parties did not intend that he should act under the Arbitration Act; they intended that he should decide the dispute summarily after inspection and hearing such evidence as he allowed, and that his decision would be final and not challengeable.
  • The judge therefore had the jurisdiction to decide the matter "in any manner he liked" once the parties agreed to accept his decision as final; the proceedings were not an arbitration within the meaning of the Arbitration Act.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Chengalroya Chetti v. Raghava Ramanuja Doss (Sadasiva Aiyar J.) Held that an application of the kind where parties agree to abide by a judge's decision is not one under Schedule II of the CPC (now reflected in the Arbitration Act) and the judge's decision, though in the nature of an award, was not governed by that schedule. The Court agreed with the reasoning in this decision and relied on it to support the view that the arbitrator envisaged by Chapter IV of the Arbitration Act must be a person other than the presiding Judge of the Court.
Nidamarthi Mukkanti v. Thammana Ramayya The case reached a decision that no appeal would lie against the judge's decision; reasoning in that case differed from Chengalroya Chetti. The Court did not accept the reasoning in that case but accepted the actual result (that no appeal would lie), distinguishing reasoning from outcome.
Sankaranarayana v. Ramaswamiah The Chief Justice disagreed with the reasoning in the two earlier decisions but agreed with their final orders; in the particular terms there the right of appeal was held not to be barred. The judgment observed that calling a court decision "quasi-arbitrator" is convenient but does not apply the second schedule. The Court noted the decision and the quoted observation to support the notion that a judge acting as a "quasi-arbitrator" is not thereby placed in the position of an arbitrator governed by the arbitration schedule or statute.
Baijnath v. Dhani Ram (Allahabad High Court) Where a Munsif decided a case after inspection and the parties agreed to accept his decision, the Munsif had a two-fold capacity (both arbitrator and Court). The Court observed the CPC does not contemplate a court giving up its duties to be a pure arbitrator and that the anomalous position arises unless arbitration is conducted by someone other than the presiding officer. The Court in the present opinion expressed full agreement with these observations and used them to support the conclusion that the arbitrator contemplated by Chapter IV must be other than the presiding Judge.
Sayad Zain v. Kalabhat Where parties referred a dispute to the Court and agreed to abide by its decision, the Court's decision was in the nature of an arbitrator's award and no appeal lay; the words "as arbitrator" were not used in that reference. Referred to illustrate that a court decision accepted by parties can be in the nature of an award and unappealable, but the Court distinguished that outcome from the present question whether the Arbitration Act governed the procedure.
Baikanta Nath Goswami v. Sita Nath Goswami (Calcutta High Court) Followed Sayad Zain: parties agreeing to leave questions to the Munsif after local inspection resulted in a decision in the nature of an award which could not be appealed; the Munsif could not review his decision once made. The opinion records this decision as following Sayad Zain but notes the Allahabad decision (Baijnath) did not approve the proposition that the Munsif could not review his decision; the present Court considered these differences not decisive on whether the Arbitration Act applies.
Halsbury's Laws of England (quoted) When parties agree to accept the judge's decision as final, the judge is a "quasi-arbitrator": the decision is unappealable and cannot be questioned, but the judge is not really an arbitrator and the decision does not resemble an award. The Court quoted this passage to support the conclusion that a judge remains a judge (a "quasi-arbitrator") and does not become a pure arbitrator under the Arbitration Act merely because parties agree to accept his decision as final.
Russell on Arbitration (13th Ed.) States that the subject-matter of an action may be referred to a judge as arbitrator and that the judge in such a case is merely an arbitrator whose award is not subject to appeal. The Court noted this authority but held that the statement does not necessarily imply that the judge ceases to be a judge in the sense of becoming a pure arbitrator governed by the Arbitration Act.

Court's Reasoning and Analysis

The Court's analysis proceeded from two central legal considerations present in the opinion: (1) the textual and structural provisions of the Arbitration Act, 1940 (in particular Chapter IV and s. 47), and (2) the practical legal and doctrinal consequences of a judge deciding a matter when parties agree to accept his decision as final.

Key steps in the Court's reasoning:

  1. Characterisation of the factual dispute: the parties disagreed as to whether the judge was to act as a pure arbitrator under the Arbitration Act or whether he was to decide the dispute and have his decision treated as final by agreement of the parties (a "quasi-arbitrator" situation).
  2. Interpretation of Chapter IV of the Arbitration Act: Chapter IV provides for arbitration "in suits" by means of a written application to the Court to refer the dispute to arbitration, the Court's order refers the matter to an arbitrator for a specified time, and thereafter the Act prescribes how the Court must deal with the suit in view of the arbitration. The Act's scheme, as the Court read it, implies that the arbitrator in such a reference should be a person other than the Judge forming the Court.
  3. Consequent inference: if the presiding Judge were to be the arbitrator under Chapter IV, then the chapter's scheme and safeguards (including formalities such as a written reference and the Court's restricted subsequent powers) would be inapplicable or nonsensical; accordingly, the Act presupposes an arbitrator independent of the presiding judicial officer.
  4. Survey of authorities: the Court examined Indian case law and learned texts. It agreed with Sadasiva Aiyar J.'s reasoning in Chengalroya Chetti v. Raghava Ramanuja Doss and with the Allahabad High Court's observations in Baijnath v. Dhani Ram that a presiding judge does not, by virtue of parties' consent, become a pure arbitrator amenable to the arbitration enactment's formalities. The Court also cited Halsbury to support the concept of a "quasi-arbitrator" (a judge whose decision the parties accept as final) and addressed contrary or differing reasoning in other decisions (e.g., Nidamarthi Mukkanti and Sankaranarayana), distinguishing reasoning from outcomes where appropriate.
  5. Assessment of authorities: the Court considered Russell on Arbitration but concluded that the text there did not compel the view that a judge in the present circumstances ceases to be a judge and becomes a pure arbitrator within the Arbitration Act's meaning.
  6. Conclusion from the synthesis: even though the learned Judge used the words "as arbitrator" in his order, that language did not convert the proceedings into an arbitration governed by the Arbitration Act. Instead, the judge acted in the position of the Court whose decision the parties agreed to accept as final (a quasi-arbitrator). Consequently, the formalities and procedural requirements of Chapter IV of the Arbitration Act (including a written application to refer the dispute) were not necessary in the present case.

The Court expressly limited its inquiry to whether the Arbitration Act applied: it held that it did not apply here because the arbitrator contemplated by that Chapter must be a person other than the presiding Judge.

Holding and Implications

Core Ruling: REVISIONAL APPLICATION DISMISSED.

The Court held that the order passed by the learned Judge on 31 March was correct. The learned Judge did not act as a pure arbitrator governed by the Arbitration Act of 1940; rather, the parties had agreed to accept the judge's decision as final (a "quasi-arbitrator" situation), and therefore the procedural requirements of Chapter IV of the Arbitration Act did not apply.

Consequences and immediate effect:

  • The revisional application filed by the plaintiff is dismissed and the rule is discharged.
  • Costs were awarded against the petitioner (the opinion states "rule is discharged with costs").
  • The order of the learned Small Cause Court Judge dismissing the petitioner's suit remains undisturbed by this revisional proceeding.

Broader implications:

  • The opinion reasons that where parties agree to accept the presiding judge's decision as final, the judge does not thereby become a "pure arbitrator" subject to the Arbitration Act's Chapter IV formalities; instead, the judge acts as a quasi-arbitrator. The decision applies that principle to the facts of this case.
  • The opinion does not purport to lay down a novel general rule beyond applying existing authorities and principles; it reconciles and distinguishes prior decisions and authorities in support of its conclusion in the present fact situation.

Rule discharged.

Signed: J.G.R (per Divatia, J.)

Show full summary ...

    K.P. Dalal v. Rustomji S. Jamadar

    Divatia, J.:—

    This revisional application has been preferred by the plaintiff against the decision of Mr. Lalkaka, Small Cause Court Judge at Bombay. The plaintiff had filed an application which was registered as suit No. 170 of 1944 for ejectment against the opponent. According to the plaintiff the opponent was his sub-tenant of certain premises situated at Gowalia Tank Road, and he wanted possession of the premises for his own use. The suit first came up for hearing before Mr. Lalkaka on January 27 last. The plaintiff's case is that it was suggested by the opponent's counsel on that day that the learned Judge should inspect the premises on February 9 and accordingly the learned Judge saw the premises and the hearing of the suit was adjourned to February 11. On that day the parties agreed that the matters in dispute between them should be decided by the learned Judge as an arbitrator; Mr. Lalkaka suggested that he would pass a decree in the petitioner's favour if the latter found for the opponent before March 30 some premises reasonably suitable to the opponent and in respect of which the latter would have to pay rent not exceeding Rs. 25 per month. The said suggestion of the learned Judge was accepted by the parties, no evidence was taken or recorded on that day and the hearing of the said suit was adjourned till March 30. According to the petitioner he searched for and found certain premises for the occupation of the opponent, but the latter did not approve of the same. On March 30 the suit was adjourned to the next day without any evidence being heard. On March 31, when it was mentioned to the Court by the opponent's advocate that none of the premises pointed out by the petitioner were suitable to him, the learned Judge immediately passed an order dismissing the petitioner's suit.

    The opponent's case as appearing from the affidavit filed in this Court is that at the first hearing of the suit on January 27, the learned Judge enquired of the advocates of the parties as to whether they wanted a formal trial or whether they were prepared to leave the matter to him to be summarily decided as an arbitrator after hearing the respective advocates and inspecting the premises. Both the advocates agreed to the learned Judge hearing the facts from them and after inspection of the premises by the Court to submit to his decision as suggested. Thereafter the learned Judge inspected the premises on February 9, and gave his decision on March 31. According to the petitioner, however, the suggestion for arbitration was not made until the hearing on February 11 after the inspection of the premises and that it was on February 11 that the learned Judge suggested that the matter should be referred to the sole arbitration of the respondent's advocate. That proposal was not agreed to by the petitioner, and ultimately both parties agreed that the matters in dispute should be decided by the learned Judge as an arbitrator.

    It would thus appear that the parties are not agreed as to the capacity in which the learned Judge was to make his final decision. According to the petitioner he was to decide as an arbitrator, while according to the opponent, although he says in his affidavit that the learned Judge was to decide the dispute as suggested, viz. summarily as an arbitrator, he had not to act as a pure arbitrator, but that his decision as a Judge was to be accepted as final by the parties. The learned Judge in his order of March 31 observes as follows:—

    “Parties having agreed that I should decide this application summarily as arbitrator after seeing the premises and hearing the learned advocates and such evidence as I may allow to be led, I award that this application should be dismissed; no order as to costs.

    Application dismissed; no order as to costs.”

    It is against this order that the plaintiff has filed this revisional application and it is contended by Mr. D.B Desai on his behalf that the learned Judge had no jurisdiction to pass that order. His main contention is that the learned Judge was to decide the dispute as an arbitrator and follow the procedure laid down in the Arbitration Act of 1940 under which the arbitration agreement must be in writing. It is further contended that the combined effect of ss. 2(c), 21 and 40 is that though a dispute in a suit pending before the Small Cause Court may be referred to an arbitrator, that Court cannot direct that the award made by the arbitrator should be filed and a decree drawn up in its terms, but it is the High Court alone that can do so, because all that s. 21 does is to enable the Small Cause Court to refer a matter to arbitration and nothing more. It has no power to pass a decree or an order on an award. The question, therefore, is whether the learned Judge acted as an arbitrator and his procedure was governed by the Arbitration Act. It is on the other hand contended by Mr. Thakor on behalf of the opponent that although the words “as arbitrator” are used by the learned Judge in his order, it was not intended by the parties that he should act as an arbitrator under the Arbitration Act. It was only intended that he should decide the dispute between the parties after inspecting the premises and hearing such evidence as he allowed to be led, with the result that he had the jurisdiction to decide in any manner he liked and that his decision was not to be challenged in appeal or in revision. There is no doubt that if the words “as arbitrator” had not been used in the order by the learned Judge and if it appears that the parties agreed that he should decide the dispute in any manner he liked after taking such evidence as he thought necessary, his decision would have been final and that it would not have been an award falling under the Arbitration Act. But the difficulty is caused by the use of the words “as arbitrator” by the learned Judge himself in his order. On the affidavits of the parties he was to decide the dispute, according to the plaintiff-petitioner, as an arbitrator, and according to the opponent as if he were an arbitrator as urged in this Court although in the affidavit itself it is stated that the advocates of both sides agreed to submit to the decision as suggested, viz. to be summarily decided as an arbitrator.

    Where the parties merely agree that they will abide by the decision which the Court may give after taking such evidence as it thinks fit or after inspecting the property, the Court does not act as an arbitrator, although there is a difference of opinion among the High Courts as to whether the decision in such a case is appealable or not. The point arising in this case, however, is not so much as to whether the decision is appealable but whether the Judge was a pure arbitrator and his decision an award under the Arbitration Act of 1940, so that the application for reference must be in writing and the formalities for making the award a decree of the Court must be complied with. Mr. Desai has strongly urged that the opponent's own affidavit as well as the order of the Judge show that the learned Judge was to decide the dispute as arbitrator, and that therefore the procedure must be under that Act, because under s. 47 of that act its provisions “shall apply to all arbitrations and to all proceedings thereunder,” and it is further urged that the Arbitration Act of 1940 is not merely an amending but a consolidating measure. The question, therefore, is whether the proceedings before the Judge became an arbitration when he was asked to decide the dispute as an arbitrator. The word “arbitration” is not defined in the Act, but Ch. IV relating to arbitration in suits—and we are concerned only with such arbitration here—clearly provides that after a written application is made by the parties to refer the dispute to arbitration, the Court shall by order refer the matter to the arbitrator and shall specify a reasonable time for making the award, and that thereafter the Court shall not deal with the matter in the suit save in the manner and to the extent provided in the Act. It is further provided that in certain circumstances the Court may modify or remit the award to the arbitrator or even supersede the arbitration and proceed with the suit. In my opinion, it is clearly implied in these provisions that the arbitrator in this chapter must be a person other than the Judge who forms the Court, and I agree with the reasons given by Sadasiva Aiyar J. in Chengalroya Chetti v. Raghava Ramanuja Doss for holding that such an application is not one under sch. II of the Civil Procedure Code of 1908, which is now replaced by the Arbitration Act of 1940. There also the parties agreed to abide by the decision of the Judge passed as an arbitrator, and it was held that although the decision was in the nature of an award and binding on the parties to the reference, it was not governed by the provisions of sch. II, and the decision was not appealable not because it fell under that schedule but because a party cannot go back on his consent to abide by the decision. The learned Judge did not agree with the reasoning to the contrary in Nidamarthi Mukkanti v. Thammana Ramayya, although he agreed with the actual decision in that case that no appeal would lie against the decision. In a later decision of the same High Court in Sankaranarayana v. Ramaswamiah the learned Chief Justice differed from the reasoning in both the former decisions in Chengalroya Chetti v. Raghava Ramanuja Doss and Nidamarthi Mukkanti v. Thammana Ramayya although he agreed with the final orders in both the cases, and he held that on the particular terms of the reference before him the right of appeal was not barred. However, the learned Chief Justice does observe in his judgment that (p. 44)—

    “A Court acting extra cursum curice has been said to act as quasi-arbitrator which may be a convenient expression but it does not involve an application of the second schedule to the Code of Civil Procedure which is applicable to arbitration.”

    The view taken by Sadasiva Aiyar J. in Chengalroya Chetti v. Raghava Ramanuja Doss which to a certain extent is shared by the learned Chief Justice in Sankaranarayana v. Ramaswamiah is also the view taken by the Allahabad High Court in Baijnath v. Dhani Ram. In that case a Munsif was asked to decide a case on an inspection of the documents filed and of the locality, and the parties agreed to accept his decision. The High Court held that the Munsif, in accepting the position of an arbitrator, had a two-fold capacity. He was an arbitrator, but he was also the Court. It was observed (p. 906):—

    “The Civil Procedure Code does nowhere contemplate that a court may give up its own duties and take up those of an arbitrator in a suit before it. If an officer should accept such a position, he should act after the case has gone to some other court. In that case, his own proceedings will be subject to all the rules in schedule II of the Civil Procedure Code and the arbitration will be regular and legal, and the anomalous position that now has arisen will never arise.”

    I am entirely in agreement with these observations. In my opinion, when a Judge is asked to arbitrate between the parties to a suit before him, he does not cease to be the Court and become a pure arbitrator. As I observed before, the provisions of Ch. IV of the Arbitration Act, as well as the provisions of Sch. II of the Civil Procedure Code before that, imply necessarily that when a dispute in a pending suit is referred to arbitration, the arbitrator must be a person other than the Judge presiding in the Court. Otherwise, the provisions of that chapter would not be applicable at all. It follows, therefore, that even though the learned Judge purports to act as an arbitrator, he is deciding the dispute not as an arbitrator under the Arbitration Act but because the parties agreed that whatever he decides will be treated as final and will be accepted by the parties. As observed in Halsbury's Laws of England, Hailsham Edn., Vol. I, p. 624:

    “When in proceedings pending before the Court the parties agree to accept the judge's decision as final, it is said that they thereby constitute the Judge a quasi-arbitrator. The effect of such an agreement is that the decision of the judge is unappealable and cannot be questioned in any way; but the judge is not thereby really placed in the position of an arbitrator: and his decision is not, and does not in any way resemble, an award.”

    Mr. Desai has relied on a statement of law in Russell on Arbitration, 13th Edition, p. 34, where it is observed that “the subject-matter of an action may be referred to a Judge as arbitrator. The Judge in such a case is merely an arbitrator and has no special powers by virtue of the fact that he is a Judge and his award is not subject to appeal.” I do not think that those observations necessarily mean that the Judge ceases to be a Judge and becomes a pure arbitrator in the sense that he can refer the dispute to himself and also remit the award to himself.

    As I have been referred to some Indian decisions in the arguments, I will briefly deal with them. It is held in Sayad Zain v. Kalabhat, where both parties to a suit referred the matter in dispute between them to the Court, and agreed to abide by its decision, and the Court passed a decree awarding a certain sum to the plaintiff, that no appeal lay from the decree, the decision of the Court being in the nature of an arbitrator's award. In that case the words “as arbitrator” were not used in the reference. It was agreed that the Court should make a settlement of the dispute between them according to Ch. XXXVIII of the then Civil Procedure Code which related to the power of the parties to state a case for the Court's opinion. The decision of the Court was that the proceedings of the Court were extra cursum curioe, and the judgment of the Subordinate Judge was in the nature of an arbitrator's award against which an appeal cannot be entertained. It is further observed that the fact that the Subordinate Judge gave his award in the form of a decree will not make it a decree from which a regular appeal can lie. This decision was followed by the Calcutta High Court in Baikanta Nath Goswami v. Sita Nath Goswami. There the parties had agreed to leave the questions in dispute between them to the determination of the Court after it had made a local inspection, and had also agreed not to raise any objection to the same or to prefer an appeal, and it was held that the decision of the Munsif was in the nature of an award and that he could not alter the award once made, or review his own decision. This Calcutta decision was not approved of in Baijnath v. Dhani Ram. The learned Judges there were of opinion that the Munsif was entitled to review his own decision. But the difference of opinion does not touch the point arising before us which is whether the learned Judge lost his capacity as a Judge and became a pure arbitrator governed by the Arbitration Act. In my opinion, he did not, and therefore the provisions of the arbitration act would not apply to him. That being so, it is not necessary that the reference to him must be in writing, and the provisions of Ch. IV of the Arbitration Act would not apply.

    For these reasons I hold that the order passed by the learned Judge is correct, and this revisional application must be dismissed. The rule is discharged with costs.

    Rule discharged.
    J.G.R
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    Comments

    K.P. Dalal v. Rustomji S. Jamadar
    (Dec 1, 1944)