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  • provisions of O. 32, Rule
  • O. 32, Rule 7 of the CPC,
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  • provisions of O. 32, Rule
  • O. 32, Rule 7 of the CPC,
Smart Summary

Structured Summary of the Opinion (Harries, C.J.)

Factual and Procedural Background

This opinion arises from two connected appeals (First Appeal No. 182 of 1937 and First Appeal No. 190 of 1937) challenging a decree of the Subordinate Judge of Muzaffarpur which dismissed the plaintiff's suit seeking a declaration that an arbitral award and the final partition decree founded on it were not binding on the plaintiff.

Background facts (as stated in the opinion): In 1929 Basant Lal Sahu (defendant 1) instituted partition suit No. 89 of 1929 against defendants 2 to 4 and the present plaintiff (who was a minor and represented by his guardian ad litem, defendant 3). A preliminary decree was passed on 29 February 1932, and defendant 2 (the karta) was ordered to furnish an account. During proceedings on the account, on 18 December 1934 the parties agreed to refer the matter to arbitration and a reference was made by the Court. At the time the minor plaintiff was represented by a guardian ad litem; no application for the Court's leave to refer the matter to arbitration on behalf of the minor was made. The arbitrator made his award on 2 March 1935, objections were disposed of, and a final decree was passed in terms of the award.

The present plaintiff brought a suit seeking a declaration that the award and the final decree were null and void and not binding on him, on the ground that the guardian ad litem had not obtained the Court's leave before agreeing to the arbitration. The Subordinate Judge dismissed the plaintiff's suit, holding that failure to obtain leave did not vitiate the proceedings. Both the plaintiff and defendants 2 to 4 appealed; defendants 2 to 4 later sought to withdraw their appeal.

Legal Issues Presented

  1. Whether an agreement to refer a suit to arbitration falls within the scope of Order 32, Rule 7, Civil Procedure Code (CPC), so that a guardian ad litem or next friend must obtain the Court's leave before entering into such an agreement on behalf of a minor.
  2. Whether the failure of a guardian ad litem to obtain the leave of the Court, as required by Order 32, Rule 7, renders an arbitral award and any final decree based on that award voidable at the instance of the minor.

Arguments of the Parties

Plaintiff-Appellant (minor)

  • The guardian ad litem did not obtain the leave of the Court before agreeing to refer the matter to arbitration.
  • Order 32, Rule 7 requires leave to be obtained and recorded when a guardian ad litem enters into any agreement or compromise on behalf of a minor, and Paragraph 1, Schedule 2 of the CPC (the procedure for referring all parties' disputes to arbitration) is subject to O. 32, R. 7.
  • Accordingly, omission to obtain leave vitiates subsequent proceedings and renders the award and final decree voidable as against the minor.

Defendants 2 to 4

  • In the Court of Appeal they supported the plaintiff's contention (they did not file a written statement in the trial court and supported the plaintiff in this Court).
  • They later sought to withdraw their appeal; the Court permitted withdrawal but ordered that they pay certain costs to defendant 1.

Defendant 1 (Basant Lal Sahu) — contesting respondent

  • Contended in the Court below that failure to obtain the Court's leave before agreeing to arbitration did not vitiate the proceedings and therefore the award and decree were binding on the minor.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
ILR (1937) All 317 (Full Bench, Allahabad) Held that Paragraph 1 of Schedule 2 CPC (reference to arbitration when all parties agree) is subject to Order 32, Rule 7; failure of guardian to obtain leave renders award and decree voidable at minor's instance. The Court relied on this Full Bench decision as directly supporting the view that O. 32, R. 7 applies and that an award and decree made after a reference without leave are voidable by the minor; the Bench’s unanimity on this point was emphasized.
39 Mad 853 (Madras High Court) Stressed necessity of a guardian ad litem obtaining leave under O. 32, R. 7; held that a suit could be brought to set aside a decree based on a compromise or reference to arbitration where leave was not obtained; avoidance re-opens the suit. Used to support the proposition that reference to arbitration requires leave under O. 32, R. 7 and that a decree based on an award in such circumstances is not binding on minors and may be set aside.
AIR 1931 Bom 500 (Bombay High Court) Held the provisions of O. 32, R. 7 to be imperative; where a suit was referred to arbitration without the sanction of the Court and a minor was represented by a guardian, the award and decree were void. Cited as further authority supporting the mandatory character of O. 32, R. 7 and the voidability of awards and decrees when leave is not obtained.
AIR 1934 Cal 845 (Calcutta High Court) Decision to the same effect as the Bombay and Madras decisions: O. 32, R. 7 is mandatory and non-compliance renders proceedings vulnerable. Cited as additional corroborative authority aligning with the Court’s conclusion.
AIR 1916 Pat 223 (Patna High Court) Held that no next friend or guardian can compromise on behalf of a minor without the leave of the Court recorded in the proceedings; referring a case to arbitration under a compromise is not equivalent to judicial approval of that compromise for the minor. Relied upon for the principle that a Court's act of referring to arbitration pursuant to a compromise does not substitute for the statutory leave required by O. 32, R. 7; the Court quoted Chamier C.J.'s observation.
36 Mad 295 (Privy Council) Held a compromise entered into by a guardian without obtaining leave under O. 32, R. 7 was not binding on the minor upon attaining majority; emphasized the mandatory nature of O. 32, R. 7 (did not decide expressly whether reference to arbitration falls within O. 32, R. 7). Accepted for the general proposition that O. 32, R. 7 is mandatory and failure to comply renders compromises/agreements and consequent decrees voidable as against the minor.
AIR 1925 Cal 475 (Calcutta High Court — Suhrawardy J. differing view) Suhrawardy J. held that an agreement to refer to arbitration is not an agreement contemplated by O. 32, R. 7. The Court considered this decision but rejected Suhrawardy J.'s view in light of the larger body of contrary authority; Page J. on the Bench did not appear to share Suhrawardy J.'s view.

Court's Reasoning and Analysis

The Court proceeded by analyzing the statutory provisions that govern references to arbitration and the protections afforded to minors. Paragraph 1, Schedule 2, CPC governs the procedure where all parties agree to refer any matter in difference between them to arbitration (permits application to the Court for an order of reference before judgment). Order 32, Rule 7, CPC governs agreements or compromises entered into by a next friend or guardian on behalf of a minor and provides (1) that no next friend or guardian shall, without the leave of the Court expressly recorded, enter into any agreement or compromise on behalf of a minor in the suit in which he acts, and (2) that any such agreement entered without leave shall be voidable against all parties other than the minor.

The Court accepted the plaintiff's submission that Paragraph 1, Schedule 2 is subject to Order 32, Rule 7. The analysis proceeded along the following lines (as stated in the opinion):

  • The precise issue had been considered and decided by a Full Bench of the Allahabad High Court (ILR (1937) All 317), which held that Para. 1 of Sch. 2 is subject to O. 32, R. 7, and that failure of a guardian ad litem to obtain leave renders a subsequent award and decree voidable at the option of the minor; the three-judge Bench was unanimous on this point.
  • The Court surveyed other state High Court decisions (Madras, Bombay, Calcutta, Patna) and a Privy Council decision which uniformly supported the mandatory character of O. 32, R. 7 and the proposition that compromises or agreements entered without leave are voidable by the minor; several of these decisions expressly held that reference to arbitration requires prior leave when a minor is involved.
  • The Court considered a contrary Calcutta High Court view (AIR 1925 Cal 475, Suhrawardy J.) which held that an agreement to refer to arbitration is not covered by O. 32, R. 7, but rejected that view as inconsistent with the weight of authority cited.
  • On statutory interpretation and policy grounds implicit in O. 32, R. 7, the Court concluded that an agreement to refer a suit to arbitration is an agreement or compromise within the meaning of O. 32, R. 7. Consequently, where a minor is a party, the guardian ad litem must obtain the Court's leave (expressly recorded) before entering into such an agreement. Merely obtaining an order referring the matter to arbitration is insufficient: the Court must first be asked, on behalf of the minor, for leave to permit the guardian to agree to the reference, and the Court must expressly record reasons for giving or refusing permission.
  • Sub-rule (2) of O. 32, R. 7 expressly provides that the minor may avoid the agreement or decree entered without leave, but other parties cannot challenge it on that ground. Applying this, the Court held that the present plaintiff (the minor) could challenge the award and decree; defendants 2 to 4 could not, which explained and justified their withdrawal of their appeal.

Holding and Implications

APPEAL ALLOWED

Holding (direct outcome):

  • The Court held that an agreement to refer to arbitration is an agreement within the meaning of Order 32, Rule 7, CPC and that the guardian ad litem was required to obtain the leave of the Court, expressly recorded, before agreeing to refer the matter to arbitration.
  • Because no such leave was obtained in the partition suit No. 89 of 1929, the arbitral award dated 2 March 1935 and the final decree based upon it are not binding on the plaintiff-appellant (the minor). The plaintiff's suit in the Court below should have been decreed; the decree of the Subordinate Judge is set aside and the plaintiff's claim is decreed as prayed.

Immediate consequences and directions:

  • The whole partition suit will be re-opened in respect of all parties from the point at which the matters were referred to arbitration; on application, the Court must proceed with the trial of the suit from that point.
  • The plaintiff-appellant is awarded his costs in this Court and in the Court below.
  • First Appeal No. 190 of 1937 (by defendants 2 to 4) was withdrawn with permission, but those defendants must pay to Basant Lal Sahu (defendant 1) the costs the latter incurred as a result of that appeal; the Court fixed those costs at Rs. 100.

The opinion notes that no new rule of law contrary to the surveyed precedents was established; the decision follows and applies existing judicial authority that treats O. 32, R. 7 as mandatory in the circumstances described.

Disposition: Appeals allowed.

Prepared from the supplied opinion text authored by Harries, C.J., with concurrence by Manohar Lall, J.

    Kedar Nath Sahu v. Basant Lal Sahu

    Harries, C.J:— These are two connected appeals from a decree of the learned Subordinate Judge of Muzaffarpur dismissing the plaintiff's claim for a declaration that a certain award and a final partition decree based upon it is not binding against the plaintiff-appellant.

    2. First Appeal No. 182 of 1937 is an appeal brought by the unsuccessful plaintiff, whereas First Appeal No. 190 of 1937 has been preferred by defendants 2 to 4. As will appear hereafter, it is clear that these defendants cannot challenge the decree of the Court below, and Mr. De who has appeared on their behalf has asked for permission to withdraw the appeal. In the circumstances, I think it is right that this appeal should be withdrawn; but these defendants must pay to Basant Lal Sahu, defendant 1, the costs which the latter has incurred as a result of this appeal.

    3. In the year 1929 Basant Lal Sahu, defendant 1, brought a partition suit No. 89 of 1929 against defendants 2 to 4, and the present plaintiff who was a minor represented by his guardian ad litem defendant 3. On 29th February 1932, a preliminary decree was passed and defendant 2, who was the karta of the joint family, was ordered to furnish a full account of his dealings with the family property. On 18th December 1934, during the pendency of the proceedings relating to the account which had been ordered, the parties agreed to refer the matter to arbitration and in due course a reference to arbitration was made by the Court. At this stage the present plaintiff, who was then a minor and a defendant, was represented, as I have stated, by defendant 3 as his guardian ad litem. No application was made on behalf of the present plaintiff to the Court for leave to refer the matter to arbitration. On 2nd March 1935, the appointed arbitrator made his award. Objections were preferred by various parties which were disposed of, and in due course a decree was passed in terms of the award. The suit out of which this appeal arises was brought by the plaintiff for a declaration that this award and the final decree, which is based upon it, is null and void and not binding upon him. It was contended on behalf of the plaintiff that as the leave of the Court was not obtained by the guardian ad litem before agreeing to refer the matter to arbitration the whole of the proceedings thereafter were vitiated and in consequence the award and decree are a nullity. Defendants 2 to 4 did not file a written statement and have in fact appeared through counsel in this Court and supported the plaintiff's contention. Defendant 1 contested the suit in the Court below and urged that the omission to obtain the leave of the Court before agreeing to arbitration did not vitiate the proceedings. The learned Subordinate Jude came to the conclusion that the failure to obtain leave of the Court before referring the matter to arbitration was not fatal and that the award and the decree based upon it were binding upon the plaintiff. As I have stated, both the plaintiff and defendants 2 to 4 have preferred appeals; but as the appeal by defendants 2 to 4 has been withdrawn, it is now only necessary to consider the plaintiff's appeal. It is common ground that no application was made to the Court by the guardian ad litem of the present plaintiff for leave to enter into an agreement to refer the matter to arbitration. According to the plaintiff's contention, the failure to obtain such leave vitiates the whole of the subsequent proceedings. Defendant 1, who is the only contesting respondent, has argued that no such leave is necessary and accordingly that failure to obtain leave does not vitiate the whole proceedings. The procedure to be followed when all parties to a suit agree to refer their differences to arbitration, is governed by Para. 1, Sch. 2, CPC, and that Paragraph is in these terms:

    (1) Where in any suit all the parties interested agree that any matter in difference between them shall be referred to arbitration, they may, at any time before judgment is pronounced, apply to the Court for an order of reference.

    (2) Every such application shall be in writing and shall state the matter sought to be referred.

    4. This paragraph makes no reference to the procedure to be adopted where one of the interested parties is a minor. However O. 32, Rule 7 of the CPC, deals with the procedure to be followed when a next friend or guardian of a minor enters into any agreement or compromise. O. 32, R. 7 provides as follows:

    (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 such agreement or compromise entered into without the leave of the Court so recorded shall be voidable against all parties other than the minor.

    5. On behalf of the plaintiff-appellant it has been argued that Para. 1, Schedule 2 of the CPC, is subject to the provisions of O. 32, Rule 7. Accordingly, it is contended that where the next friend or guardian ad litem of a minor party agrees to join in a reference to arbitration, the leave of the Court to do so on behalf of the minor must be obtained by the next friend or guardian ad litem and expressly recorded in the proceedings in compliance with the terms of O. 32, R. 7 of the CPC, and that the omission to obtain leave will render an award or any decree based upon it voidable as against the minor.

    6. In my opinion this view is well-founded. The precise point arose in a case decided by a Full Bench of the Allahabad High Court, ILR (1937) All 317.1 The Full Bench, of which I was a member, held that Para. 1 of Sch. 2 to the Code of Civil Procedure, was subject to the provisions of O. 32, Rule 7. Accordingly, it was held that where a guardian ad litem had failed to obtain the leave of the Court to refer a matter to arbitration, an award and a decree based upon it were voidable at the instance of the minor. There was some difference of opinion in that case; but upon this point the three Judges comprising the Bench were unanimous.

    7. In, 39 Mad 853,2 a Bench of the Madras High Court also stressed the necessity of a guardian ad litem obtaining the leave of the Court before entering into an agreement. The Bench held that a suit could be brought on behalf of minors to set aside a decree passed on a compromise in another suit or appeal in which the minors were parties, on the ground that leave of the Court under O. 32, R. 7 of the CPC was not obtained by their guardian ad litem to enter into the compromise on their behalf. The Bench further held that leave of the Court under O. 32, R. 7 must be obtained by a guardian ad litem of minors for agreeing on their behalf to refer through Court the subject-matter of a suit to arbitration; and where no such leave was obtained, a decree passed on an award is not binding on the minors and a suit could be instituted on behalf of the minors to obtain a declaration that the decree was not binding on them. It was farther held that the avoidance of a decree in a partition suit will have the effect of re-opening the whole suit in respect of all the parties thereto, and on an application being made, the Court must proceed with the trial of the suit.

    8. A similar view was taken by a Bench of the Bombay High Court in AIR 1931 Bom 5003 in which it was held that the provisions of O. 32, R. 7 were imperative, and that where one of the parties to a suit was a minor and represented by his mother as guardian and the suit was referred to arbitration by the parties by a reference made without the sanction of the Court, the award and decree passed in terms of the award were void. The case in AIR 1934 Cal 8454 is to the same effect. There is also a decision of this Court, AIR 1916 Pat 223,5 which supports the contention of the appellant in this appeal. In that case it was expressly held that no next friend or guardian could compromise a case on behalf of a minor without the leave of the Court expressly recorded in the proceedings and that the action of a Court in referring a case to arbitration in accordance with the compromise between the guardian of a minor and other parties to a suit was not equivalent to approving of the compromise on behalf of the minor, At page 225, Chamier C.J observed:

    I am not prepared to whittle away the salutary provisions of O. 32, R. 7. In my opinion the compromise was not binding on the minor, inasmuch as the leave of the Court had not been obtained before his guardian thought fit to withdraw her application for that leave.

    9. The importance of a guardian ad litem obtaining the leave of the Court before entering into any compromise on behalf of the minor was considered by their Lordships of the Privy Council in 36 Mad 295.6 In that case a member of a joint family brought a suit for partition. Defendant 3 was the father of defendant 6 who was a minor, and the Court appointed the father guardian ad litem of his son. The father entered into a compromise without obtaining the leave of the Court, and their Lordships held that such compromise and the decree passed upon it was not binding upon the minor on his attaining majority. This decision of their Lordships does not deal with the question whether an agreement to refer to arbitration is within O. 32, R. 7: but it does lay down that the provisions of O. 32, R. 7 are mandatory and that failure to comply strictly with them will render any compromise or agreement or any decree based on such voidable at the instance of the minor. Counsel for the respondent has relied upon a Bench decision of the Calcutta High Court, AIR 1925 Cal 475.7 In that case Suhrawardy J. did in terms hold that an agreement to refer to arbitration is not such an agreement as is contemplated by O. 32, R. 7 of the CPC. Page J., who was the other member of the Bench, does not appear to have taken the same view; and in my judgment the view of Suhrawardy J. cannot be accepted in face of the large body of authority to the contrary to which I have referred.

    10. In my judgment the agreement to refer to arbitration is such an agreement as is contemplated by O. 32, R. 7 of the CPC. Where a minor is a party to litigation no effective reference to arbitration can be made by the parties unless the next friend or guardian ad litem first obtains the leave of the Court to agree to any such reference. Merely obtaining an order referring the matter to arbitration is not sufficient. The Court must first be asked on behalf of the minor for its leave to permit the guardian to agree to a reference to arbitration and the Court must expressly record its reasons for giving or refusing such permission. It is only after obtaining the leave of the Court that the guardian can agree to a reference to arbitration and any agreement without such leave will render all subsequent proceedings invalid at the option of the minor. It is clear from the terms of O. 32, R. 7 that the minor only can challenge an award or a decree based upon it made after a reference without obtaining the Court's leave. Sub-see. (2), O. 32, R. 7 of the CPC, expressly provides that the minor can avoid the award or decree; but the other parties to the reference cannot. As the reference in the present case was made without the guardian of the minor first obtaining the leave of the Court, the plaintiff, who was the minor defendant in the suit, can challenge the award and the decree based upon it. The other parties to the suit, namely defendants 2 to 4, cannot challenge the proceedings and for that reason the appeal preferred by them has in my view been rightly withdrawn.

    11. For the reasons which I have given, I am satisfied that the award and decree based upon it passed in the partition suit No. 89 of 1929 are not binding upon the plaintiff-appellant, and that being so, his suit in the Court below should have been decreed. I would therefore allow this appeal, set aside the decree of the learned Subordinate Judge and decree the plaintiff's claim as prayed. The effect of this will be that the whole suit will be re-opened in respect of all the parties from the point at which the matters were referred to arbitration and the Court on application being made to it must proceed with the trial of the suit from that point. The plaintiff-appellant will have his costs in this Court and in the Court below. The defendant appellants in Appeal No. 190 of 1937 which has been withdrawn, must pay the costs of the defendant respondent in that appeal, which we fix at Rs. 100.

    Manohar Lall, J.:— I agree.

    S.G/R.K

    12. Appeals allowed.

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    Comments

    Kedar Nath Sahu v. Basant Lal Sahu
    (Jan 27, 1939)