Citation Codes

Equivalent Citations

citation codes

Case Number

O.C.J Award No. 82 of 1941

Judges

Kania, J.

Acts

Section 2(c) of the Arbitration Act, 1940, Court

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Smart Summary

Structured Summary of the Opinion: Petition to Set Aside Award of 8th September, 1941

Factual and Procedural Background

The petitioners are trustees under the will of the late Ardeshir Hormusji Wadia, owning multiple properties including two plots at Kurla and one at Parel. On 22 November 1933 the trustees granted a new lease of two Kurla plots to the respondent for the remaining nine years from 1 June 1932. Clause 5 of that lease (quoted in the opinion) set out a mechanism for the lessee (respondent) to "take back" the land and for the valuation of structures by persons termed "panchas" and a "sur-pancha" (quoted text included in the opinion).

When the lease period approached expiry, the trustees offered a fresh lease, which the respondent declined. The respondent appointed Mr. G.A. Kamtekar to value the structures and requested the trustees to appoint their pancha. The trustees declined. Mr. Kamtekar proceeded, held meetings, and made a report described by the respondent as an award dated 8 September 1941. The petitioners applied to set aside that award and raised three objections which the Court considered.

Legal Issues Presented

Whether the Bombay High Court had jurisdiction to accept the award on its file under Section 2(c) of the Arbitration Act, 1940, given that the land and events were at Kurla and some trustees did not reside in Bombay.
Whether clause 5 of the lease constituted a reference to arbitration such that Mr. Kamtekar's report could be treated as an "award", or whether it was only a valuation (not an arbitration award).
Whether Mr. Kamtekar, acting alone at the respondent's instance without a pancha nominated by the trustees and without a sur-pancha for both parties, had jurisdiction to act and to make a binding award.

Arguments of the Parties

Petitioners' Arguments

The Court lacks jurisdiction to accept the award on file because the cause of action arose at Kurla, rents were collected at Kurla, and not all trustees resided in Bombay; therefore Section 2(c) of the Arbitration Act, 1940 would not confer jurisdiction on the Bombay High Court.
Clause 5 contains no true reference to arbitration and therefore any report is a valuation rather than an award; the petitioners relied on (1887) 18 Q.B.D 71 and relevant Calcutta decisions to support the proposition that an agreement for valuation does not create an arbitration.
Mr. Kamtekar had no jurisdiction to proceed alone because clause 5 contemplated appointment of one pancha by each party and a sur-pancha for both; no pancha was appointed by the trustees and no sur-pancha was appointed for both, so a sole person acting at the respondent's instance was not authorized.
The clause was deliberately worded to make appointment of a pancha non-compulsory and the lessee might choose not to appoint one; therefore the lessor had no right to proceed unilaterally with valuation.

Respondent's Arguments

The Bombay High Court was competent to receive the award because a Court which would have jurisdiction to decide questions arising from the subject-matter of the reference is the proper Court for filing the award; jurisdiction does not require the whole cause of action to have arisen within the Court's territory.
Clause 5 should be treated as creating an arbitral reference because the parties could appoint persons (even non-technical persons such as a barrister) who would take evidence and make a decision after an inquiry, producing an arbitral award; authorities including (1901) 1 Q.B 624 and passages from Redman on Arbitration and Russell on Arbitration were relied upon to support this view.
The two panchas, or the agreement between the parties, could be construed so as to permit appointment of the sur-pancha by the panchas; therefore Mr. Kamtekar's role could be supported as within the agreed mechanism.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
(1887) 18 Q.B.D 71	Distinction between valuation and arbitration: Lord Esher M.R. stated arbitration resolves a dispute whereas valuation is intended to avoid disputes; where no dispute exists when valuers are appointed, the report is a valuation, not an arbitration award.	The Court treated this decision as persuasive authority supporting the view that clause 5 might create only a valuation mechanism and not an arbitration; the Court found "considerable force" in its reasoning but did not pronounce finally on this point because a separate objection proved decisive.
30 Cal. 8312 (appears as 30 Cal. 831 in other passages)	Held that where an agreement provided valuation by three arbitrators in a context where no matter was in dispute between the parties, the valuation was not an award under arbitration laws; a report by arbitrators appointed by the plaintiff alone was not an award.	The Court cited this decision as further support for the proposition that the clause might effectuate a valuation rather than an arbitration; it reinforced the Court's view that there may have been no dispute suitable for arbitration under clause 5.
(1901) 1 Q.B 624	Concerned whether an architect issuing a completion certificate acted as an arbitrator or quasi-arbitrator and whether such a person could be liable for negligence; held such functions could be arbitrational or quasi-arbitrational.	The Court observed the case was not directly helpful to decide whether a valuation provision is an arbitration; it was noted but not treated as decisive for the present dispute.
Redman on Arbitration (treatise) and Russell on Arbitration (treatise)	Textbook passages were relied upon by respondent to support the contention that appointment of a non-technical person could lead to a judicial-type inquiry and an arbitral award.	The Court noted these authorities were relied upon but did not treat them as determinative; they were referenced in support of the respondent's contention that an inquiry with evidence could yield an award.

Court's Reasoning and Analysis

The Court considered the petitioners' three objections in turn and applied statutory construction and contract interpretation tied closely to the text of clause 5.

1. Jurisdiction under Section 2(c) of the Arbitration Act, 1940

The Court rejected the petitioners' narrow reading of S.2(c) that would require the whole cause of action to have arisen within the Court's territory. Instead it read the provision to mean that any civil Court which would have jurisdiction to decide the questions forming the subject-matter of the reference (if those questions had been the subject of a suit) is competent to receive the award.
The Court also relied on Order 31, Rule 2 of the Civil Procedure Code (1908) which normally requires all trustees to be made defendants but contains an express exception when any trustee is outside British India; consequently the respondent could have sued without joining the trustee who was abroad (petitioner 2). This supported the conclusion that the Bombay High Court had jurisdiction to accept the award on file.
Accordingly, the first contention (lack of jurisdiction) failed.

2. Whether clause 5 created an arbitration (award) or merely a valuation

The Court examined authorities distinguishing arbitration from valuation (notably (1887) 18 Q.B.D and the Calcutta decision cited). Those decisions held that when valuers are appointed to fix a price in circumstances where there is no dispute when the valuers are appointed, the resulting report is a valuation and not an arbitration award.
The respondent countered that clause 5 permitted appointment of non-technical persons who could take evidence and conduct an inquiry resembling arbitration, and authorities and treatises were cited in support. The Court acknowledged that such a contingency could give rise to a judicial inquiry and that the matter was not free from doubt.
However, the Court declined to pronounce a final, considered opinion on this question because it found the third objection to be decisive.

3. Whether Mr. Kamtekar could act alone without the petitioners' pancha and without a sur-pancha

The Court examined the language of clause 5: each party was to appoint a "pancha" and "there should be one pancha on behalf of us both" (sur-pancha). The Court emphasized that the word "pancha" does not necessarily mean "arbitrator" and "sur-pancha" does not necessarily mean "umpire"; the official translation of "surpancha" is "head or chief pancha".
The clause does not specify who was to appoint the sur-pancha. The respondent argued the two panchas would appoint the sur-pancha. The Court found no justification for that conclusion in the wording of the clause.
The Court placed the burden on the respondent to show that Mr. Kamtekar's decision was binding on the petitioners despite the absence of a pancha for the trustees and a sur-pancha for both. The respondent failed to show that the parties had agreed to delegate to the panchas the right to appoint the sur-pancha on behalf of both parties.
The Court observed the clause made it optional for the lessee to appoint a pancha at all, and contained no provision authorizing the lessor (the trustees) to proceed with valuation if the lessee declined to appoint a pancha. Reading the clause as a whole, the Court concluded it was deliberately worded so as to prevent compulsion of appointment of a pancha.
Because the trustees could legitimately refrain from appointing a pancha, the Court held that Mr. Kamtekar's unilateral proceedings at the respondent's instance were not authorized by the agreement.

Holding and Implications

Holding: Award set aside.

The Court set aside Mr. G.A. Kamtekar's award dated 8th September 1941 on the ground that clause 5 did not authorize him to proceed alone in the absence of a pancha nominated by the trustees and a sur-pancha for both parties. The Court found the respondent had not discharged the burden of showing that Mr. Kamtekar's decision was binding on the petitioners.

Costs: Although the petitioners failed on the jurisdiction point, the Court ordered that the respondent should pay three-fourths of the petitioners' costs of these proceedings.

Implications: The decision directly annuls the particular award and orders costs against the respondent. The opinion does not purport to establish a broad new precedent beyond its analysis of clause 5 and the construction applied to the specific contractual language; the Court declined to give a final pronouncement on whether clause 5 generally creates an arbitration because the third objection was determinative in this case.

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Cursetji Jamshedji Ardaseer Wadia And Others v. Dr. B.D Shiralee .

1. This is a petition to set aside an award made by one Mr. G.A Kamtekar on 8th September, 1941. The petitioners are the present trustees of the trusts created by the last will and testament of the late Mr. Ardeshir Hormusji Wadia. As such trustees they own numerous properties consisting of large tracts of open land at Kurla and several properties in the adjoining six villages. One property is at Parel also. Except petitioner 2 the remaining trustees reside in Bombay. Petitioner 2 has been living in England and has an English wife. He comes to Bombay at intervals of two or four years, stays a month or so here and returns to England. In respect of the management of the trust properties, since 1882 there is a trust office at Kurla. For the Parel property a separate mehta is employed. He collects the rent which is used for charities in Bombay according to the trust deed. Two different plots of land at Kurla were let out by the trustees to two different parties and some buildings were erected thereon. On 22nd November, 1933, the then trustees gave a new lease of the two plots for the remaining period of nine years commencing from 1st June 1932, to the respondent. Clause 5 of that lease is material and runs as under:

You are to be entitled to take back the aforesaid land, after the expiration of the period mentioned in the agreement of lease or before the expiration of the period in the event of breach of any of the terms of this agreement; provided that, you are to give me one month's previous notice before you so intend to take up the land. I will then, during that period, appoint one pancha on my behalf and you should appoint one pancha on your behalf, and there should be one pancha on behalf of us both. After you give me the price which the said panchas may fix for my structures I will hand over the land to you together with the structures. If I do not approve of the valuation made by the panchas or if I do not appoint the pancha in time then, I will, within three months of the first notice, remove the structures, clean the land and give the same into your possession. If I fail to do so then, you should take the aforesaid land into your possession together with the structures thereon or without structures if there be none, according to law. I am to be responsible for all the costs in respect thereof. In such case I will not claim compensation on any ground.

2. This clause deals with the rights of the parties at the end of the period of lease if a fresh lease is not taken by the lessee. When the period of lease was about to come to an end the trustees offered a fresh lease to the respondent but he intimated that he did not want the same. Thereafter the respondent appointed Mr. Kamtekar as arbitrator on his behalf to value the structures and called upon the petitioners to appoint their arbitrator. The trustees declined to do so. The respondent then purported to treat Mr. Kamtekar as the sole arbitrator authorized to act under cl. (5) of the lease, and after giving notice of the various meetings which he was holding, Mr. Kamtekar made his report, which is called the award.

3. On behalf of the petitioners three objections are raised against the award. The first is that this Court has no jurisdiction to accept this award on the file. Under Section 2(c) of the Arbitration Act, 1940, “Court” means a civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit. It was argued that the land in this case was at Kurla, the rents were recovered at Kurla, and the lease was executed at Kurla; therefore the whole cause of action arose at Kurla. It was argued that as the land was at Kurla and as all the petitioners did not reside in Bombay the Court had no jurisdiction to accept this award on file. In my opinion the construction sought to be put on S. 2(c) by the petitioners is erroneous. It does not mean that a Court has jurisdiction to receive an award only if the whole cause of action arose within the jurisdiction of the Court. Reading the sub-section as worded, it is clear that any Court which would have jurisdiction to decide the question arising from the subject-matter of the reference, would be the proper Court in which the award may be filed. To give the Court jurisdiction it is not necessary that the whole cause of action should arise there. The Court has jurisdiction to determine the subject-matter of the disputes between the parties also when the parties reside within its jurisdiction or the land was within its jurisdiction. The provisions of O. 31, R. 2 of the CPC, 1908, are also material. It is provided by that rule that all trustees should normally be made party defendants. At the end of that rule there is a clear exception, viz., that if any of the trustees is outside British India, he need not be joined as a defendant. Therefore, if the respondent was to file a suit in respect of the subject-matter of the dispute and the suit was to be against the petitioners, it was open to the respondent not to make the second petitioner a party at all. Therefore, the Bombay High Court would have jurisdiction to accept this award on its file. That contention of the petitioners therefore fails.

4. The second contention is that by clause (5) there is no reference to arbitration and therefore no award. The document is only a report on valuation. In this connexion the petitioners relied on (1887) 18 Q.B.D 71. In that case on a sale of land one of the conditions was that the purchaser should buy over the timber on the land at a valuation. It was provided for the purpose of such valuation that each party should appoint a valuer and the valuers thus appointed should before they proceeded to act appoint by writing an umpire and that the two valuers or if they differed their umpire should make a valuation. The two valuers appointed being unable to agree the umpire made the valuation. It was held that the decision of the umpire was not an arbitration but it was only a valuation. In a considered judgment Lord Esher M.R has pointed out the distinction between valuation and arbitration. It was pointed out that the object of an arbitration was to decide a dispute which had arisen while the object of valuation was to avoid disputes. It was also pointed out that there was nothing in the nature of a dispute when the valuers were appointed and therefore in that case the report was not considered an award but a valuation. In 30 Cal. 8312, there was an agreement of lease containing a proviso that at the expiration of the period of lease, in the event of a new lease not being given, the lessor should be at liberty to resume direct possession of the land demised and to take over all the buildings then standing thereon at a valuation arrived at by three arbitrators. It was held that as there was no matter in dispute be-tween the parties which could be referred to arbitration, the valuation made by the three persons appointed by the plaintiff was not an award within the meaning of the arbitration laws. The three arbitrators in that case were to be appointed as follows: one by each party and the third by the two arbitrators so appointed. It was further provided that if either party neglected to appoint the arbitrator, the other party would be competent, after giving a month's notice in writing, to appoint all the three arbitrators and the decision of such arbitrators would be final against both parties. The Court considered the previous decision and also (1887) 18 Q.B.D 7. The learned Judges came to the conclusion that the report made by the three persons appointed at the instance of the plaintiff only was not on a matter in difference between the parties on an arbitration.

5. It was contended before me on the respondent's behalf, that in the present case it was open to the parties to appoint even a barrister and the person so appointed, not being experienced in valuation, will have to take evidence. Therefore, the decision would be after a judicial inquiry resulting in an award of the arbitrators. In support of that contention (1901) 1 Q.B 6243 and passages from Redman on Arbitration and Russell on Arbitration were relied upon. In (1901) 1 Q.B 624 the question before the Court was whether the architect who had given a completion certificate according to the terms of a building contract, stating that a certain amount was due, was liable for negligence. A.L Smith M.E and Collins L.J (Romer L.J dissenting) held that the architect was not liable because his functions were of an arbitrator or a quasi-arbitrator. That case is not directly helpful because the question was not whether the decision was as a valuer. The question was whether such a person after acting fairly and reasonably in the matter of certifying payment was liable for negligence.

6. In my opinion in the present case the parties did not intend to make the persons named by them arbitrators. I am led to that view on reading cl. (5) as a whole. It is to be noticed that the respondent is expressly given a right not to appoint his pancha at all and in that event he is entitled to take away his structures without any claim by the petitioners. Secondly, even after the panehas make their report, it was open to the respondent to say that he did not care for the valuation and could take away the structures. It was strongly urged that these considerations are not relevant because in spite of these rights the respondent would be bound by the report, and if he chose to let the structures remain, he could not claim that the petitioners should pay a higher amount. There is considerable force in the reasoning in (1887) 18 Q.B.D 7 and 30 Cal. 831 for holding that there was no dispute between the parties to go to arbitration. It is true that under cl. 5 it would be open to either of the parties to appoint a non-technical man like a barrister, and if such an appointment were made that party will have to take evidence on which he would make his final report. A contingency of that kind may give rise to a judicial inquiry and I am not prepared to say that the case is free from doubt altogether. I do not desire to pronounce a considered opinion on this point because in my opinion the third objection urged for the petitioners is fatal.

7. The third objection is that under cl. (5) Mr. Kamtekar had no jurisdiction to proceed alone as he purported to do. By that clause each party was given a right to nominate a pancha and there was to be one sur pancha on behalf of them both. The petitioners did not appoint a pancha on their behalf and no sur-pancha was appointed on behalf of both. At the instance of the respondent Mr. Kamtekar alone proceeded to value the structures. In my opinion, the agreement between the parties does not authorize that step to be taken at all. The word “pancha” does not necessarily mean “arbitrator.” It is not provided that the surpuncha was to act on a difference between the arbitrators. “Surpancha” does not necessarily mean an umpire. In fact the official translation is “head or chief pancha.” That is the correct meaning of the expression “surpancha. “The parties had agreed that such a surpancha should be on behalf of both of them. While stating that each party shall appoint one pancha it is not expressly stated who was to appoint the surpancha. It was argued on behalf of the respondent that therefore the two panehas were to appoint the surpancha. I find no justification for that conclusion. As the respondent seeks to support a decision of a tribunal which is not a Court established according to the law of the land, the burden is on the respondent to show that the decision is binding on the petitioners. It is for the respondent to show that Mr. Kamtekar had authority to act as he did, and in spite of the absence of a surpancha acting on behalf of both, the decision of Mr. Kamtekar is binding on the petitioners. In my opinion the respondent has particularly to show that the parties had agreed to delegate to the arbitrators the right to appoint this surpancha on behalf of both. I see nothing unusual in the parties agreeing that each party shall nominate one pancha on his behalf, but the surpancha shall be one who enjoyed the confidence of both of them. There is nothing in the wording of this clause to show that the parties had delegated to the arbitrators the right to nominate such a surpancha, and in the absence of such proof the action of Mr. Kamtekar, taken at the instance of the respondent, in my opinion, is unjustified. It is not a case where a party had only failed to appoint his arbitrator. It is a case where a third arbitrator, who was to act for both, has not been appointed. No provision of law is pointed out under which the respondent was authorised to act as he did, except on the construction that the two arbitrators had to appoint the umpire under the agreement between the parties. I am unable to accept that construction.

8. Under cl. (5) while it is optional to the lessee to allow the structures to remain on the premises when giving over possession and accept the figure of valuation fixed by the panchas, it is also open to him not to appoint any pancha at all. In that event there is no provision permitting the lessor to proceed with the valuation. This apparently one-sided agreement has to be considered with the fact that there is no restriction on the lessee's right to put up structures of any value. If the lessee chose to erect buildings worth lacs of rupees, according to the respondent's contention, the petitioners were bound to take them up at the valuation, even if the trustees had no funds to do so. The clause read as a whole, in my opinion, is deliberately worded so as to prevent a compulsion of appointment of a pancha.

9. If the trustees were not minded to take up the buildings, which they had no means to prevent the respondent from building and which they were unwilling to take up, they could refrain from appointing the pancha to proceed with the valuation. That appears to be the proper reading of the clause as a whole. This contention of the petitioners succeeds and the award is set aside. As the petitioners have failed on the question of jurisdiction, in my opinion, the respondent should pay three-fourths of the petitioner's costs of these proceedings.

10. Award set aside.

Cursetji Jamshedji Ardaseer Wadia And Others v. Dr. B.D Shiralee .

Structured Summary of the Opinion: Petition to Set Aside Award of 8th September, 1941

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments

Respondent's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Cursetji Jamshedji Ardaseer Wadia And Others v. Dr. B.D Shiralee .

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