Citation Codes

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Case Number

O.C.J Appeal No. 51 of 1932; Award No. 106 of 1931

Attorney(S)

R.S Billimoria, with M.S Vakil, for the appellants.
M.C Setalvad, with M.A Somji and J.S Khergamvala, for the respondents.
At the hearing of the appeal, the appellants contended inter alia that (1) the procedure by way of Chamber summons was wrong, (2) that there cannot be an award against a firm in the firm name and (3) that the provisions of Order XXI, rule 50(2), do not apply to proceedings to enforce an award.

Judges

Sir John Beaumont, C.J
Mr. Rangnekar, J.

Acts

provisions of the Code with the Indian Arbitration Act. Section 15 of the Indian Arbitration Act
rule 373 of the High Court Rules applications under the Indian Arbitration Act
section 15 of the Indian Arbitration Act.
provisions of the Indian Arbitration Act
provisions of Order XXI, rule 50(2),
Indian Arbitration Act, section 15,
provisions of Order XXI, rule 50,
rule 80 of our Rules
rule 10 of Order XXI,
rule 16 of Order XXI,
Order XXI, rule 50(2),
Order XXI, rule 50,
rule 80, clause (o),

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Smart Summary

Summary of Opinion — Beaumont, C.J.; Rangnekar, J.

Factual and Procedural Background

The dispute arises from an arbitration award against a firm and a summons seeking to make two appellants liable on that award. In 1925 there was a firm called Vallabhdas Hiralal carrying on business in piecegoods in Bombay. Its partners included another firm called Ramniklal Manilal, an individual named Hiralal, and an individual named Umersi. The partners in the firm Ramniklal Manilal were the two appellants in this appeal and a man named Harakchand.

Towards the end of 1928 the Vallabhdas Hiralal firm was dissolved and a new firm was formed, referred to in the opinion as the respondent firm, Mulchand Pranjivandas. In the respondent firm Umersi and Harakchand were partners (Umersi in his own right and Harakchand as a partner in the firm of Ramniklal Manilal); Hiralal was not a partner. The central factual question was whether the two appellants were partners in the new respondent firm, either individually or by virtue of being partners in the firm Ramniklal Manilal.

After formation of the respondent firm, the plaintiffs, the Bharat Spinning and Weaving Co., Ltd., contracted with that firm; contracts were signed on behalf of the respondent firm by Umersi. By February 12, 1931, an arbitration award was made holding the respondent firm liable to the plaintiffs for approximately Rs. 50,000. Until the award there is no evidence of any demand having been made on the appellants; demands had been made to the respondent firm by name. On March 2, 1931, the plaintiffs first demanded payment from the two appellants; the appellants denied liability. On July 21, 1931 a summons was taken out purporting to be under Order XXI, rule 50(2), and the matter proceeded by way of that summons. This appeal arises from a decision of Mr. Justice Kania in relation to the findings on the issues raised on that summons. The Chief Justice (Beaumont, C.J.) and Rangnekar, J. both addressed preliminary objections and the merits; the Chief Justice ultimately held that neither Manilal nor Madhavlal were partners in the firm Mulchand Pranjivandas and allowed the appeal.

Legal Issues Presented

Whether the two appellants were partners in the respondent firm Mulchand Pranjivandas (either personally or as partners in the firm Ramniklal Manilal).
Whether an arbitration award can be made against a firm in the firm name.
Whether the provisions of Order XXI, rule 50(2) (Code of Civil Procedure) apply to proceedings to enforce an arbitration award made under the Indian Arbitration Act.
Whether applications under the Indian Arbitration Act (to enforce an award) must be made by petition under the High Court Rules (rule 373), or whether they may properly be brought by summons (in particular under rule 80, clause (o)).

Arguments of the Parties

Appellants' Arguments

It was contended that an award cannot be made against a firm in the firm name.
The appellants argued that Order XXI, rule 50(2) does not apply to proceedings to enforce an award because an award is not a decree, and therefore there is no "decree-holder" and "no Court which passed the decree" as required by that rule.
It was further contended that under the High Court Rules (rule 373) applications under the Indian Arbitration Act must be by petition, but the present application had been made by summons and was therefore in the wrong form.

Respondents' (Plaintiffs') Position as Reflected in the Opinion

The plaintiffs (Bharat Spinning and Weaving Co., Ltd.) litigated to enforce the arbitration award against the respondent firm and, by summons under Order XXI, rule 50(2), sought leave to execute the award by making the two appellants liable.
Procedurally, the plaintiffs had filed the award (or taken steps under the Indian Arbitration Act) and then proceeded under the execution / leave provisions referenced in Order XXI.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Louis Dreyfus & Co. v. Purusottum Das Narain Das (Calcutta High Court)	The construction that provisions of Order XXI should be read to apply to awards enforceable as decrees (i.e., treating "decree" as including an award enforceable as a decree and treating "the Court which passed the decree" accordingly).	The Court relied on and adopted the Calcutta High Court's construction as supporting the view that Order XXI rules (including rule 50(2)) can be read to apply to an award filed and enforceable as a decree under section 15 of the Indian Arbitration Act.

Court's Reasoning and Analysis

The court addressed the preliminary objections in sequence and grounded its reasoning in the interaction between the Indian Arbitration Act and the Civil Procedure Code (Order XXI).

1. Award against a firm name: The court rejected the objection that an award cannot be made against a firm in the firm name. If a firm signs a submission to arbitration in the firm name, an award in the firm name is permissible. This view was supported by prior authority (including the Calcutta High Court) and was accepted by both Beaumont, C.J. and Rangnekar, J.

2. Application of Order XXI rules to enforcement of awards: The core analytical problem identified was an apparent textual mismatch: Order XXI speaks in terms of decrees, decree-holders and the Court which passed the decree, whereas an award is not literally a decree and there may be no "Court which passed the decree." The court resolved the problem by reference to the Indian Arbitration Act, section 15, which provides that an award, on being filed in Court under the Act, "shall be enforceable as if it were a decree of the Court." The Act also defines "Court" (section 4) so that for the relevant purposes the High Court is the pertinent Court. Faced with two choices — either render section 15 meaningless or read the procedural Code provisions so as to treat an award enforceable as a decree as falling within the terminology of Order XXI — the court adopted the latter construction.

The court explained that rules such as Order XXI, rule 10 (procedure to commence execution) and rule 16 (and rule 50(2)) would otherwise leave no machinery for enforcing an award treated as a decree. Reading "decree" to include an award enforceable as a decree, and reading "the Court which passed the decree" to mean the Court by which the award is to be treated as if a decree (i.e., the High Court under section 15), preserves the operation of section 15 and permits summary enforcement of arbitral awards in the same manner as decrees. The Calcutta High Court's decision in Louis Dreyfus & Co. v. Purusottum Das Narain Das supported this construction and was followed.

3. Form of proceedings — petition vs summons: The appellants relied on rule 373 of the High Court Rules requiring petitions for applications under the Indian Arbitration Act. The court observed, however, that rule 80, clause (o) permits an application for leave under Order XXI, rule 50(2) to be disposed of by a Judge in Chambers and that if rule 50(2) applies to enforcing an award then rule 80, clause (o) likewise applies to such an application. The court concluded that the application could properly be dealt with by summons. That said, the court found the particular summons defective in form: it should have been an originating summons (because there were no pending proceedings) and should not have described parties as "petitioners" and "respondents" but rather as "plaintiffs" and "defendants" (if parties were to be named). The court ordered amendment of the summons into the correct originating format.

4. Merits: After overruling the preliminary objections and hearing evidence on the merits, Beaumont, C.J. found on the evidence that neither Manilal nor Madhavlal were partners in the firm Mulchand Pranjivandas and accordingly allowed the appeal. Rangnekar, J. expressed agreement with both the construction points and the result.

Holding and Implications

Holding: APPEAL ALLOWED. The Chief Justice held that, on the evidence, neither Manilal nor Madhavlal were partners in the firm Mulchand Pranjivandas and therefore they could not be held liable on the award against that firm.

Procedural and legal implications drawn by the Court (as reflected in the opinion):

The Court construed the Indian Arbitration Act, section 15, together with the provisions of Order XXI so that an award filed in Court and enforceable as if a decree can be executed under the procedural machinery of Order XXI by treating "decree" as including such an award and the "Court which passed the decree" as the Court in which the award is filed for enforcement (in the present context, the High Court).
Accordingly, Order XXI provisions (including rule 50(2)) are applicable to enforcement proceedings in respect of an arbitral award filed under the Indian Arbitration Act; to hold otherwise would make section 15 ineffectual and frustrate summary enforcement of awards.
Applications for leave under Order XXI, rule 50(2) may be dealt with by a Judge in Chambers under rule 80, clause (o), and need not be by petition exclusively; however, where there are no pending proceedings the originating instrument should be an originating summons and must be in proper form.
Direct consequence for the parties: the two appellants were held not to be partners in the respondent firm and were therefore not held liable on the arbitration award. The appeal was allowed and the claim to make the appellants liable was dismissed by reason of the finding on partnership.

The opinion did not purport to create an entirely novel rule of law but applied an interpretive construction to reconcile the Indian Arbitration Act with the Code of Civil Procedure and relied upon the earlier Calcutta High Court decision cited in the text.

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Manilal Lallubhai And Another (Original S), v. The Bharat Spinning And Weaving Co. Ltd. (Original Petitioners),

Beaumont, C.J:—

This is an appeal from a decision of Mr. Justice Kania. It arises on a summons taken out in the matter of an arbitration seeking to make the two appellants liable on an award made against a firm.

The material facts giving rise to the dispute are that in the year 1925 there was a firm called Vallabhdas Hiralal doing business in piecegoods in Bombay, and the partners in that firm were another firm called Ramniklal Manilal, a man named Hiralal, and a man named Umersi. The partners in the firm of Ramniklal Manilal were the two appellants in the present case and a man named Harakchand. Towards the end of the year 1928 the firm of Vallabhdas Hiralal was dissolved, and a new firm was started, which I will call “the respondent firm”, Mulchand Pranjivandas. It is admitted that in that firm Umersi and Harakchand were partners, they having been partners in the old firm, Umersi in his own right and Harakchand as a partner in the firm of Ramniklal Manilal, and Hiralal was not a partner.

The question which arises in these proceedings is whether or not in that new firm the two appellants were partners, either individually or as being partners in the firm of Ramniklal Manilal. After the formation of the respondent firm dealings took place between the respondents in this appeal, namely, the Bharat Spinning and Weaving Co., Ltd., whom I will refer to as “the plaintiffs”, and that firm. All the contracts, which were for substantial amounts, were signed on behalf of the respondent firm by Umersi. Towards the end of the year 1930 the respondent firm seems to have been in financial difficulties and moneys due to the plaintiffs were not paid. The matters in dispute were referred to arbitration, I suppose under the arbitration clauses in the various contracts, and on February 12, 1931, an award was made, under which the respondent firm were held liable to pay to the plaintiffs a sum approximately of Rs. 50,000. Down to the date of that award there is no evidence of any demand having been made by the plaintiffs for payment from the appellants. All demands were made to the respondent firm by its name. On March 2, for the first time the plaintiffs made a demand for payment of the amount found due on the award from the two appellants, and they at once denied their liability, and asserted that they were not partners and never had been partners in the respondent firm. On July 21, 1931, a summons was taken out, purporting to be under Order XXI, rule 50(2), and it is in respect of the findings of the issues raised on that summons thus this appeal is brought.

In the first place certain preliminary objections are taken to the form of the proceedings. It is said, first, that there cannot be an award against a firm in the firm name. There is, in my opinion, no substance in that point. If a firm in the firm name enters into a contract containing a clause for submission of disputes to arbitration, I see no reason why the resulting arbitration should not be in the firm name. A more substantial point is that the provisions of Order XXI, rule 50(2), do not apply to proceedings to enforce an award. On the actual language of that sub-rule there would certainly seem to be force in the objection. The sub-rule provides, so far as material, that where a decree holder claims to be entitled to cause a decree to be executed against any person as being a partner in the firm, he may apply to the Court which passed the decree, for leave to execute the decree, and the Court may either grant leave or order the question of liability to be tried or determined in any manner in which an issue in a suit may be tried or determined. It is said that rule cannot apply to enforcing an award, because there is no decree-holder and there is no Court which passed the decree. The question, however, cannot be disposed of merely by reference to the language of the sub-rule. Under the Indian Arbitration Act, section 15, it is provided that an award, on a submission on being filed in the Court according to the foregoing provisions, shall be enforceable as if it were a decree of the Court; and the “Court” is defined in section 4 of the Act in such a way that for the purpose of these particular proceedings the Court is the High Court. So that what section 15 provides is not that the award is to become a decree, but that it shall be enforceable as if it were a decree spinning of the High Court. The difficulty is that in Order XXI, which is the order dealing with execution proceedings, the language is throughout inapplicable to enforcing an award, and it seems to me that we have really to choose between two things, either we must say that section 15 of the Indian Arbitration Act is of no effect because there are no provisions by which an award can be enforced as if it were a decree, or we must read the relevant provisions of Order XXI as covering an award, by treating “decree” as including an award which has become enforceable as a decree, and by treating “the Court which passed the decree” as referring to the Court whose decree the award is to be treated as being for the purpose of execution, that is in this particular case the High Court. I say that because under rule 10 of Order XXI, which is the rule under which execution is ordinarily started, it is provided that if the holder of a decree desires to execute it, he shall apply to the Court which passed it; and unless we read that rule in the case of an award, in the sense I nave suggested, there are no provisions for enforcing an award which has become enforceable as a decree. I am not prepared to bold that section 15 of the Indian Arbitration Act is really a dead letter. The same construction would have to be adopted under rule 16 of Order XXI, and indeed that construction has been adopted by the Calcutta High Court in the case of Louis Dreyfus & Co. v. Purusottum Das Narain Das. If that construction is, adopted under rules 10 and 16, I see no reason why a similar construction should not be adopted under rule 50(2), and why we should not read rule 50(2) as meaning that where the holder of an award, which has become enforceable as a decree, claims to be entitled to cause the award to be executed, he shall apply to the High Court, as the Court referred to in section 15 of the Indian Arbitration Act. I think, therefore, that the preliminary objection must be overruled.

Then another preliminary point was taken, namely, that under rule 373 of the High Court Rules applications under the Indian Arbitration Act have to be made by petition and the application here was by summons. But the answer to that is that under rule 80, clause (o), application for leave under Order XXI, rule 50(2), maybe disposed of by a Judge in Chambers; and if that rule applies to enforcing an award, then rule 80, clause (o), must apply to an application for enforcing an award. The summons in the present case is clearly in the wrong form. It is entitled as it should be “In the matter of the indian arbitration act and in the matter of an arbitration between the Bharat Spinning and Weaving Co. Ltd., and the firm of Mulchand Pranjiwandas and Award dated February 12, 1931”; and then it is expressed to be between the Bharat Spinning and Weaving Co. Ltd., as petitioners and Mulchand Pranjiwandas as respondents. If there are to be parties to the summons at all, they ought to be called plaintiffs and defendants. But, in my opinion, it is not necessary that a summons under the indian arbitration act should be inter partes; but it must be an originating summons, since there are no pending proceedings. The summons must, therefore, be amended by turning it into an originating summons and striking out the reference to petitioners and respondents. I think, therefore, the learned Judge was right in dismissing the preliminary objections and hearing the evidence on the merits. [The rest of the judgment is not material to this report. On the evidence the learned Chief Justice held that neither Manilal nor Madhavlal were partners in the firm of Mulchand Pranjiwandas. He therefore allowed the appeal.]

Rangnekar, J.:—[His Lordship, after stating facts and discussing evidence, proceeded:] I shall now refer briefly to the preliminary points raised by Mr. Billimoria on behalf of the appellants. The first of them is that an award cannot be made against a firm the firm name. But if a firm as such is a party to a reference and the submission is signed spinning by the firm in the firm name, I see no objection to the award on the reference being made in the firm name. Apart from other authorities this is the view which is taken by the Calcutta High Court, and I respectfully agree with it.

The next contention is that the provisions of Order XXI, rule 50, do not apply to an award made under the indian arbitration act. The argument is that an award is not a decree and therefore there is “no decree-holder” and “no Court which passed the decree”. Undoubtedly the language of Order XXI, rule 50, seems to lend support to the argument, but I think we must read the provisions of the Code with the Indian Arbitration Act. section 15 of the Indian Arbitration Act provides that an award on a submission on being filed in the Court under the Act shall be enforceable as if it were a decree. section 11(2) provides that the arbitrators at the request of a party to a submission or any person claiming under him and on payment of fees and charges and costs of filing etc., shall cause the award to be filed in Court. Section 4 of the Act defines “the Court” in the Presidency towns to be the High Court. The indian arbitration act does not lay down any separate or special procedure for enforcing an award made under the provisions of the Act, and unless one can turn to the Civil Procedure Code, it is difficult to see how an award can be enforced otherwise than perhaps by a suit. The plain meaning of the provisions of the Indian Arbitration Act to which I have referred seems to me to be that an award under the indian arbitration act on being filed in the High Court can be enforced, that is executed, as if it were a decree of the High Court. The procedure for enforcing a decree of the High Court is contained in order xxi of the code, and the principal rule of that order is rule 10. It provides that if the holder of a decree desires to execute it, he shall apply to the Court which passed it. It is not disputed that in the case of an award under the indian arbitration act against an individual the award can be enforced in accordance with the provisions of order xxi of the code. That being the case, and reading the relevant provisions of the Act and the provisions of Order XXI, I think it must be held that in such a case the party applying to enforce an award is “the holder of a decree”, and the High Court in this particular case is the “Court which passed the decree”. The result of holding otherwise would be to make section 15 of the Indian Arbitration Act for all practical purposes a dead letter, prevent the parties from enforcing their rights summarily, and thus defeat the very object for which the law of arbitration is enacted. I think, therefore, this contention must also be overruled.

Then there remains the third contention that the respondents ought to have proceeded by a petition under the indian arbitration act and not by summons. But under rule 80 of our Rules an application for leave under Order XXI should be made by a summons, and therefore there is, in my opinion, no substance in this contention.

In the result, I agree, that the appeal must be allowed.

Attorneys for appellants: Messrs Khandvala & Chhotalal.

Attorneys for respondents: Messrs Edgelow, Gulabchand & Co.

Appeal allowed.

B.K.D

Manilal Lallubhai An... v. The Bharat Spinning ...