Citation Codes

Equivalent Citations

citation codes

Case Number

Privy Council Appeal No. 29 of 1944; Allahabad Appeal No. 2 of 1940

Advocates

Nevill
Barrow Rogers
Hy. S.L. Polak and Co.
S. Hyam
C.S. Rewcastle
J.M.R. Jayakar
W. Wallach
Sir Thomas Strangman

Judges

Sir John Beaumont
Lord Goddard
Justice Lord Thankerton

Acts

S. 20, Evidence Act.
sub-s. (1) of rule 7,

See more information ...

Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

This appeal arises from a partition suit concerning the property of a Hindu Mitakshara family. The plaintiff was a son of Mukta Prasad. The first three adult defendants — Kallu Lal, Sohan Lal and Sewak Lal — were sons of Mukta Prasad's only brother. Defendants 4 and 5 (Ram Lal and Jainarain) were the minor sons of Kallu Lal. The plaintiff alleged separation in status but non-division of property, and claimed partition and a half-share.

The adult defendants' written statement contended the family remained joint but did not dispute the claim for partition. Sohan Lal was appointed guardian-ad-litem for the minors and adopted the adult defendants' written statement. On 1 September 1933 an application (signed by Kallu Lal, Sewak Lal and the plaintiff) sought appointment of Shri Swami Ramanandji (their Guru) as referee to decide the facts in dispute and the costs, requesting appointment under S. 20 of the Evidence Act. On 2 September 1933 Sohan Lal appeared and verified that application. On 4 October 1933 the Subordinate Judge appointed the Swami as a referee under S. 20 (Evidence Act) to decide the case and to present his statement to court or send it in writing. On 7 October 1933 the referee reported, dividing the family property into two parts, allotting one part to the plaintiff and the other to the defendants.

Objections on behalf of the minors were filed on 17 October 1933, principally (a) that the guardian had not purported to act as guardian when entering the agreement for reference and no prior court sanction had been obtained, and (b) that the agreement, if limited to S. 20 of the Evidence Act, only made the Swami a witness of statements and did not empower him to make a division. Objections by adult defendants alleging fraud were also filed but not considered by the opinion as necessary to decide the appeal.

On 3 November 1933 the Subordinate Judge held the reference and award valid and passed a decree in the terms of the award. An appeal lay to the High Court of Judicature at Allahabad, which on 8 September 1939 allowed the appeal, set aside the lower court's decree and remitted the case to the Subordinate Judge to be readmitted under its original number and decided in accordance with law. The present appeal to the court whose opinion is summarized challenges the High Court's decision.

Legal Issues Presented

Whether the reference to arbitration and the subsequent award were valid, as held by the Subordinate Judge, or invalid, as held by the High Court.
Whether the reference could properly be regarded as made under S. 20 of the Evidence Act (i.e., a reference for information) or should be treated as a reference under the provisions of Sch. II, Civil Procedure Code (paras 1 and 3), given the apparent mistake in invoking S. 20.
Whether Order 32, Rule 7, Civil Procedure Code — requiring the leave of the Court expressly recorded before a guardian or next friend may enter into any agreement on behalf of a minor — was complied with, and if not, whether that non-compliance rendered the agreement to refer voidable as to other parties.
Whether paragraph 16(2) of Schedule II, Civil Procedure Code (and related provisions concerning awards made on references in suits) precludes an appeal against a decree entered in terms of an award — i.e., whether it was too late to challenge the award in this case.

Arguments of the Parties

Appellant's Arguments (as advanced by Sir Thomas Strangman)

It was argued that it was too late to challenge the award because, under para. 16(2) of Schedule II, Civil Procedure Code, when the Court pronounces judgment according to an award and a decree follows, no appeal lies except insofar as the decree is in excess of and not in accordance with the award.
The appellant relied on the decision in Mariam Bibi v. Mt. Amina Bibi (cited with ILR and AIR references) to support the proposition that the decree in terms of an award is final and not open to appeal on questions touching the award's validity in such circumstances.

Objections / Position of the Minors (by guardian-ad-litem)

The guardian-ad-litem's objections included that the guardian had not purported to act as guardian when entering the agreement for reference and that no prior sanction of the Court had been obtained, so the agreement was not binding on the minors.
It was also contended that, as the agreement had been made only under S. 20, Evidence Act, the Swami was merely a person referred to for information (an admission-maker) and therefore had no authority to make a division of the property.

Lower Court's Position (Subordinate Judge)

The Subordinate Judge treated Sohan Lal's subsequent verification of the application as a signature without qualification and therefore as signing both in his individual capacity and as guardian-ad-litem, which the Judge took to validate the guardian's agreement to refer.
The Subordinate Judge held the reference to arbitration and the resulting award valid and passed a decree in terms of the award.

Other Parties

Adult defendants filed objections alleging fraud against the Swami; the opinion states these need not be considered for disposal of the appeal.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
ILR (1937) ALL 317; cited also as LLR ('37) 24 AIR 1937 All 65 : ILR (1937) All 317 : 166 IC 99 (Full Bench) — Mariam Bibi v. Mt. Amina Bibi	Consideration whether Order 32, Rule 7 applies to an agreement to refer matters in dispute to arbitration; whether objection to the validity of a reference comes within para. 15 of Sch. II, Civil P.C.	The court agreed with that Full Bench ruling that O. 32, R. 7 does apply to agreements to refer matters in dispute to arbitration. On the narrower question whether objections to validity of the reference come within para. 15, the court aligned with the view of Iqbal Ahmad J. (in that Full Bench) that the powers under Sch. II relating to awards presuppose a valid reference; therefore if there is no valid reference the purported award is a nullity and may be challenged.

Court's Reasoning and Analysis

The court approached the case by examining (1) the nature of the purported appointment of the Swami (whether under S. 20 of the Evidence Act or under the rules for reference in suits), (2) compliance with Order 32, Rule 7 (protection of minors), and (3) whether procedural provisions respecting awards and appeals precluded the present challenge.

On S. 20 (Evidence Act): the court noted that S. 20 treats statements made by persons to whom a party has expressly referred for information as admissions. The court observed that appointing an outside party to decide matters in dispute (and costs) is not a reference for information, so if the referral were to be regarded solely under S. 20 the reference would be invalid. The court therefore treated the parties' allusion to S. 20 as a mistake and, following practice in Indian courts, construed the reference as having been intended under the provisions of Schedule II (paras 1 and 3) of the Civil Procedure Code.

On Order 32, Rule 7 (protection of minors and requirement of leave of Court): the court reproduced the rule and analysed the record. The Subordinate Judge's factual finding was that Sohan Lal did not initially sign the application and was brought before the Judge the next day and then verified it; Sohan Lal signed without qualification and thus, the Subordinate Judge concluded, must be taken to have signed in all capacities (including as guardian-ad-litem). The court accepted that factual inference as reasonable.

However, the court observed that the formal requirements of O. 32, R. 7 were not complied with: there was no formal application by the guardian-ad-litem for leave to enter into the agreement, and no such leave was expressly recorded in the proceedings. The court emphasised that the requirement to have the Court's leave expressly recorded was added to the rule in 1908 and is imperative; its terms must be strictly complied with. The court agreed with the High Court and a Full Bench of the Allahabad High Court that O. 32, R. 7 applies to agreements to refer matters in dispute to arbitration, because such agreements remove the decision from the jurisdiction of the Court and fall squarely within the mischief the rule is designed to prevent — namely, the risk that minors' interests might be compromised without judicial oversight.

On para. 16(2) of Schedule II and finality of decrees in terms of awards: the appellant contended that once the Subordinate Judge entered a decree in terms of an award, para. 16(2) precluded further appeal except on the narrow ground that the decree exceeded and was not in accordance with the award. The court reviewed related provisions (paras 12, 14, 15 and 16) and the functional structure: those powers presuppose a valid reference and an award that is open to certain challenges. The court distinguished the language of para. 21 (which expressly requires the Court to be satisfied that the matter has been referred to arbitration) from para. 16 (which lacks such an express requirement). Their Lordships agreed with the view that if there is no valid reference the purported award is a nullity and may be challenged in appropriate proceedings. Consequently, para. 16(2) did not preclude an appeal in a case where the reference itself was invalid.

Weighing these considerations together, the court concluded that non-compliance with the imperative requirement in O. 32, R. 7 (leave of the Court expressly recorded before a guardian enters into an agreement on behalf of a minor) rendered the agreement to refer susceptible to challenge. Given that the reference was not validly made in the manner required to protect minors, the award could be impugned and the High Court was correct to set aside the decree and remit the case to the Subordinate Judge.

Holding and Implications

Holding: The court dismissed the appeal, upheld the High Court's decision to set aside the Subordinate Judge's decree made in terms of the award, and ordered that the appellant pay the costs of the respondents. The High Court's order to readmit the suit in the Subordinate Judge's Court under its original number and decide it in accordance with law was treated as correct.

Implications:

Direct effect on the parties: the decree entered in terms of the referee's award by the Subordinate Judge was set aside; the case was remitted to the Subordinate Judge to be readmitted and decided according to law. The appellant was ordered to pay the respondents' costs.
Legal consequences emphasised by the court: (a) a purported referral to an outside party to decide matters in dispute is not a reference under S. 20 of the Evidence Act (which relates to statements for information), and should be treated under the relevant provisions of Schedule II of the Civil Procedure Code; (b) Order 32, Rule 7 applies to agreements to refer matters in dispute to arbitration and its requirement that the leave of the Court be expressly recorded for agreements entered into on behalf of minors is mandatory and must be strictly complied with; and (c) where there is no valid reference, a purported award is a nullity and may be challenged — para. 16(2) does not bar such an appeal.
Broader precedent-setting: the court expressly adopted existing Full Bench authority that O. 32, R. 7 applies to agreements to refer to arbitration and endorsed the position that objections to the validity of a reference are not necessarily foreclosed by para. 16(2) if the reference itself is invalid. The opinion does not purport to create novel law beyond affirming those principles as applied to the facts of this case.

Disposition: Appeal dismissed. Costs awarded to the respondents.

Show full summary ...

Chhabba Lal v. Kallu Lal And Others

Sir John Beaumont. -

This is an appeal from a decree of the High Court of Judicature at Allahabad dated 8th September 1939, which set aside a decree of the Subordinate Judge of Cawnpore dated 3rd November 1933, passed in a partition suit and sent the case back to the Subordinate Judge with directions to re-admit it under its original number and to decide it in accordance with law. The question for decision is whether a reference to arbitration made in this suit, and an award made thereon, were valid as the Subordinate Judge held, or invalid as the High Court of Allahabad held in appeal. The question arises in the following circumstances.

The plaintiff brought this suit for division of the property of a Hindu family governed by the Mitakshara. The plaintiff was the son of one Mukta Prasad, and the first three adult defendants, Kallu Lal, Sohan Lal and Sewak Lal were the sons of the only brother of Mukta Prasad, whilst defendants 4 and 5 Ram Lal and Jainarain, were the minor sons of Kallu Lal. The plaintiff alleged that the family had separated in status, but that the property had not been divided, and he claimed partition of the property and that a half share be allotted to him. In their written statement, the adult defendants alleged that the family was still joint, but the claim for partition was not disputed. In the suit, Sohan Lal was appointed guardian-ad-litem of the minor defendants, and as such he adopted the written statement of the adult defendants. On 1st September 1933, an application was made to the Subordinate Judge by Kallu Lal, Sewak Lal and the plaintiff stating that the parties had appointed Shri Swami Ramanandji who was the Guru of the parties, a referee for the decision of all the facts in dispute in the suit and also for the decision in respect of the costs of the suit and they asked that the Swami might be appointed a referee under S. 20, Evidence Act. On 2nd September 1933, Sohan Lal appeared before the learned Subordinate Judge and verified this application and the learned Judge made the following note:

"This application was verified to-day by Sohan Lal, defendant, on being identified by Babu Munna Lal, Vakil, after hearing and understanding the same."

On 4th October 1933, the learned Judge made an order that according to the application of the parties, Shri Swami Ramanandji was appointed a referee under S. 20, Evidence Act, for deciding this case and directed him, after deciding the case, to present himself in Court or send in writing, his statement in respect thereof. On 7th October 1933, the referee made his report dividing the family property into two parts allotting one part to the plaintiff and the other to the defendants. Objections to the report on behalf of the minors were lodged on 17th October 1933, the two principal objections being first that the guardian of the minors did not purport to act as a guardian entering into the agreement for reference and that as no previous sanction of the Court had been obtained the agreement was not binding on the minors, and secondly that the alleged agreement in terms only constituted Swami Ramanandji a referee under S. 20, Evidence Act, and that as such he could only make statements and had no authority to make a division of the property. Objections were also filed on behalf of the adult defendants alleging fraud against the Swami but it is not necessary to consider these objections. On 3rd November 1933, the learned Subordinate Judge, having held that the reference to arbitration and the award were valid, passed a decree in the terms of the award. From this decree an appeal was brought to the High Court of Allahabad which on 8th September 1939, allowed the appeal, set aside the decree of the lower Court and sent the case back to the lower Court to readmit under its original jurisdiction and to decide in accordance with law. From this decree the present appeal is brought. Neither the learned Subordinate Judge nor the High Court dealt with the objection that the reference was not justified by S. 20, Evidence Act. That section is in these terms:

"Statements made by persons to whom a party to a suit has expressly referred for information in reference to a matter in dispute are admissions."

It is obvious that a reference to an outside party to decide matters in dispute in a suit and the question of costs is not a reference to that party for information in reference to a matter in dispute, and if the reference is to be regarded as made only under S. 20 it was a bad reference. However, the reference might have been made under the provisions of para. 7. This reference here seems to be a mistake for paragraphs 1 and 3-Ed. (1) and (3) of Sch. II, Civil P. C., and their Lordships will treat the reference as so made, as the Courts in India seem to have done, and regard the allusion to S. 20, Evidence Act, as a mistake. The second objection requires more consideration. Order 32, R. 7 provides :

"(1) No next friend or guardian for the suit shall, without the leave of the Court expressly recorded in the proceedings, enter into any agreement or compromise on behalf of a minor with reference to the suit in which he acts as next friend or guardian. (2) Any agreement or compromise entered into without the leave of the Court so recorded shall be voidable against all parties other than the minor."

The learned Subordinate Judge explained in his judgment disposing of the objections what took place in relation to the application for reference. He said that Sohan Lal in the first instance had not signed the application for a reference, and accordingly the learned Judge directed that Sohan Lal should be brought before him the next day. Sohan Lal duly appeared the next day and verified the agreement. The learned Judge considered that, since Sohan Lal signed the agreement without qualification, that is without specifying whether he was acting in his own capacity or as guardian-ad-litem of the minors he must be taken to have signed in all capacities in which his signature was required, and their Lordships are disposed to accept that view. The learned Judge further considered that by referring the matter to arbitration the Court must be taken to have been satisfied that the reference would be for the benefit of the minors. There was indeed no reason to doubt this because the interest of the minors was identical with that of the other defendants, their father and uncles, and there was no reason to suppose that the interest of the minors was likely to be sacrificed. At the same time, it is clear that the terms of O. 32, R. 7, were not complied with. There was no formal application by the guardian-ad-litem for the leave of the Court to his entering into the agreement for reference to arbitration, nor was any such leave formally given, or expressly recorded in the proceedings. The note on the record quoted above does not show that the Judge realised that he was dealing with the guardian-ad-litem of minors. The requirement in O. 32, R. 7 that the leave of the Court be expressly recorded in the proceedings was added in 1908, and Sir Thomas Strangman for the appellant says that the addition to the rule merely gave statutory effect to the previous practice. Be that as it may, the rule is imperative and in their Lordships' view its terms must be strictly complied with. Their Lordships agree with the view of the High Court following on this point, a ruling of a Full Bench of the Allahabad High Court, ILR (1937) ALL 317,1 disagreeing with certain other Indian rulings, that O. 32, R. 7 applies to an agreement to refer matters in dispute to arbitration. Such an agreement, which removes the decision of a matter in dispute from the jurisdiction of the Court and refers it to some outside party is clearly an agreement with reference to the suit and not only falls within the terms of the rule, but comes within the mischief at which the rule appears to be aimed. The interests of minors might well be sacrificed by an improper reference to arbitration and it is necessary that their interest be protected by the Court. If minors successfully challenge an agreement to refer as not made in compliance with sub-s. (1) of rule 7, it is avoided against all parties under sub-s. (2).

Sir Thomas Strangman has taken a second point, namely that it is too late to challenge the award since no appeal lay from the decree of the Subordinate Judge made in terms of the award. In support of his argument he relies on the provisions of para. 16 (2) of Sch. II, Civil PC. The section is one of a group of sections conferring powers upon the Court in relation to an award made on a reference in a suit. Section 12 gives power to the Court to modify the award in certain cases. Section 14 empowers the Court to remit the award or any matter referred to arbitration to the reconsideration of the arbitrator in the cases specified. Section 15 provides that no award shall be set aside except on the specific grounds mentioned, or the award "being otherwise invalid." Section 16 provides that where the Court sees no cause to remit the award and no application has been made to set aside the award or the Court has refused such application the Court shall after the time for making such application has expired proceed to pronounce judgment according to the award. Then sub-s. (2) provides that upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except in so far as the decree is in excess of, and not in accordance with, the award. The argument of Sir Thomas Strangman is that under the section the decree of the Subordinate Judge is final, and for this he relied on the case in LLR ('37) 24 AIR 1937 All 65 : ILR (1937) All 317 : 166 IC 99 (FB), Mariam Bibi v. Mt. Amina Bibi. (ibi sup.).

The ruling of the Court in that case that O. 32, R. 7 applies to an agreement to refer to arbitration has already been noted with approval. A further question referred to the Full Bench was "whether an objection to the validity of reference to arbitration comes within the provisions of para. 15 of Sch. II, Civil P. C." The learned Chief Justice and Harries J., considered that it did, relying on the words "being otherwise invalid" in para. 15; Iqbal Ahmad J., considered that it did not. Upon this question their Lordships agree with the view of Sir Iqbal Ahmad. In their opinion all the powers conferred upon the Court in relation to an award on a reference made in a suit presuppose a valid reference on which an award has been made which may be open to question. If there is no valid reference, the purported award is a nullity, and can be challenged in any appropriate proceeding. By way of contrast the language of para. 21 of Sch. II, may be noted. That paragraph empowers the Court to pronounce judgment according to an award made on a reference out of Court, and the opening words require the Court to be satisfied that the matter has been referred to arbitration. There are no such words in para. 16. In their Lordships' view, therefore, an appeal lay to the High Court in this case. For these reasons their Lordships think that the decision of the High Court was right and they will humbly advise His Majesty that this appeal be dismissed. The appellant must pay the costs of the respondents.

Appeal dismissed.

Chhabba Lal v. Kallu Lal And Others

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments (as advanced by Sir Thomas Strangman)

Objections / Position of the Minors (by guardian-ad-litem)

Lower Court's Position (Subordinate Judge)

Other Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Chhabba Lal v. Kallu Lal And Others

Comments