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Case Number
Judges
  • Kulwant Sahay, J.
Acts
  • S. 326 of Act VIII of 1859
  • S. 323 of Act VIII of 1859.
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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Kulwant Sahay, J.
Acts
  • S. 326 of Act VIII of 1859
  • S. 323 of Act VIII of 1859.
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Smart Summary

Judgment Summary — Kulwant Sahay, J. (Revision Application)

Factual and Procedural Background

The present matter is a revision application by the defendant in a Small Cause Court suit, challenging an order of the Small Cause Court Judge of Patna dated 28th February, 1924. The underlying suit sought recovery of money on the basis that the defendant unlawfully fished a portion of the river Ganges (described in the record as running from "Sherpur ??? to Dinapur"), where the plaintiff claimed exclusive fishing rights. The defendant denied trespass, asserting he had fished in a different portion where he had a right to fish.

By order dated 15th February, 1924, the Court, under paragraph 3 of the Second Schedule to the Code of Civil Procedure, referred the dispute to a sole arbitrator, Munshi Abdul Ghani. Before the reference was communicated to the arbitrator and before records were sent, the plaintiff filed an application dated 19th February, 1924 alleging that the arbitrator demanded money and indicated he would not decide in the plaintiff's favour unless paid; the plaintiff characterised the arbitrator as dishonest and asked for cancellation of the reference. The defendant filed objections denying the allegations.

An affidavit by a karpardaz filed on 26th February supported the plaintiff's claim, alleging that the arbitrator demanded money and that the defendant was prepared to pay a sum to influence the award. The Small Cause Court Judge considered the affidavit and on 28th February, 1924 cancelled the order of reference and allowed the plaintiff to withdraw from arbitration. The defendant sought revision in this Court, contending the Judge had no jurisdiction to cancel a reference made under paragraph 3 of the Second Schedule.

Legal Issues Presented

  1. Whether, once a Court has made an order under paragraph 3 of the Second Schedule to the Code of Civil Procedure referring a matter to arbitration, the Court has jurisdiction to cancel that order and supersede the arbitration before an award is made.
  2. Whether the Court's power to supersede arbitration is limited to the grounds specified in paragraph 5 (and related provisions) of the Schedule, or whether the Court possesses an inherent jurisdiction to cancel a reference for good cause shown (for example, alleged misconduct or corruption of the arbitrator) prior to the making and filing of an award.

Arguments of the Parties

Defendant / Applicant (in Revision) — Main Contentions

  • Once an order of reference had been made under paragraph 3 of the Second Schedule, the learned Small Cause Court Judge had no jurisdiction to cancel that order and to proceed with trial.
  • Reliance was placed on clause (2) of paragraph 3 (which restricts the Court from dealing with matters referred to arbitration) and on paragraph 5 of the Schedule (which lists the cases in which the Court can make an order superseding arbitration).
  • The defendant contended the arbitration could be superseded only on one of the specific grounds set out in paragraph 5, and allegations of corruption against an arbitrator should be considered only after the award is filed under paragraph 15 of the Schedule.

Plaintiff / Respondent — Main Contentions

  • The plaintiff alleged on oath that the arbitrator demanded money and indicated a willingness to decide according to payment; the plaintiff therefore sought cancellation of the reference and an order preventing the arbitrator from deciding or returning the reference if already forwarded.
  • It was also contended (on the other side of the legal question) that, although the Second Schedule does not specifically empower cancellation for the ground alleged, the Court possesses an inherent power to cancel its order if good cause is shown to prevent a miscarriage of justice.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Pestonjee Nussurwanjee v. Manockjee & Co. Principle that submission to arbitration cannot be arbitrarily revoked by a party; a submission can be revoked only for good cause (reference under S.326 of Act VIII of 1859; corresponds to para.17 of the present Schedule). Used to support the proposition that a submission to arbitration may be revoked for good cause and that courts can supersede arbitration when satisfied that manifest injustice would result from enforcing the submission.
Nil Monee Bose v. Mohina Chunder Dutt Held that a reference to arbitration made under an order of Court cannot be revoked at the instance of a party; the party is bound by the court's order and arbitration must proceed subject to law (case concerned remand under S.323 of Act VIII of 1859). Cited as authority that a plaintiff cannot annul or revoke an order of reference; the court observed the case did not consider the power of the Court to cancel its own order on good cause being shown.
Halimbhai Kirimbhi v. Shankersai Held that objections to an arbitrator's fitness should ordinarily be considered after award submission; where matter is referred, Court cannot deal with the matter except as provided in the Code (CPC 1882 provisions cited: S.506, S.508, S.510, S.521). Identified as a direct authority for the contention that objections of the present kind cannot be entertained prior to the arbitrator's award; but the court here noted that the case did not consider the Court's inherent power to cancel an order in a proper case to prevent manifest injustice.
O.B. Coley v. V.A. Dacoste Taken for granted in that case that an application to revoke an arbitration reference can be allowed on good grounds. Cited as supportive precedent where revocation on good grounds was assumed to be permissible.
Mahomed Wahiduddin v. Hakiman Held a party could withdraw from reference if it transpired arbitrator acted as mokhtar (agent) of one party without remuneration; taken for granted that a party may withdraw for good cause before award is made. Used to show prior recognition that withdrawal from reference before award may be permitted where good cause exists.
Kunji Lal v. Banwari Lal Division Bench held that parties cannot revoke or withdraw from submission except for good cause; conceded that if good cause shown, revocation may be permitted. Cited for the proposition that revocation is permissible only for good cause and that courts have recognised this exception.
Chaturbhaj v. Baghubar Dayal Held the intention of the Second Schedule is that a court's reference should ordinarily be superseded only for reasons specified in the Schedule and that corruption allegations should be dealt with under paragraph 15 after award; judges expressed doubt whether inherent jurisdiction exists but said if it does, it should be exercised cautiously and applicant should show risk of irreparable injury. Relied upon to show judicial caution about exercising any inherent jurisdiction to supersede arbitration prior to award and the need for showing potential irreparable injury.

Court's Reasoning and Analysis

The Court considered the competing legal positions: (a) that the Code's Second Schedule (notably paragraph 3(2) and paragraph 5) confines the Court's power to deal with matters referred to arbitration and lists the circumstances in which arbitration may be superseded; and (b) that notwithstanding the absence of a specific provision, the Court possesses an inherent jurisdiction to cancel its own order of reference if good cause is established to prevent injustice.

The opinion surveys authority showing a divergence of view:

  • Pestonjee Nussurwanjee supports the general principle that a submission to arbitration can be revoked for good cause, and that parties are bound by arbitration agreements unless execution is impossible or manifest injustice would result.
  • Nil Monee Bose is cited for the proposition that a party cannot unilaterally revoke a court-ordered reference, but the Court observed that the case did not consider whether the Court itself can cancel its order upon proper cause being shown.
  • Halimbhai Kirimbhi (Bombay Division Bench) is a direct authority seemingly limiting pre-award objections, holding that such objections are to be considered after award; however, that decision did not address whether a court's inherent power could be invoked to prevent a manifest injustice.
  • Other cases (O.B. Coley, Mahomed Wahiduddin, Kunji Lal) are noted as recognising or assuming that withdrawal or revocation is permissible for good cause in appropriate circumstances.
  • Chaturbhaj v. Baghubar Dayal recognises the Schedule's restrictive intent but records judicial uncertainty on inherent jurisdiction, recommending cautious, sparing exercise and the need to show risk of irreparable harm.

After reviewing the authorities, the Court concluded that although the Second Schedule contains no explicit provision authorising cancellation of the Court's order of reference under paragraph 3, the inherent power of a Court to make orders necessary for the ends of justice supports cancelling such a reference in a proper case for good cause. The Court reasoned that where the arbitrator's misconduct is such that an award would inevitably be set aside, it is reasonable for the Court to intervene before the arbitration proceeds, rather than allow a process to continue which must ultimately be annulled.

The opinion notes that in the present case the petitioner did not dispute that the cause shown would be a good cause to supersede the arbitration if the law permitted doing so; the only contention advanced in revision was that the Judge lacked jurisdiction to cancel the reference.

Holding and Implications

Holding: The Court held that the order passed by the learned Small Cause Court Judge cancelling the order of reference and allowing the plaintiff to withdraw from arbitration was not without jurisdiction. The revision application was dismissed with costs and the application is dismissed.

Implications:

  • Direct effect: The Small Cause Court Judge's order cancelling the reference to arbitration is upheld, and the revision application by the defendant is dismissed with costs.
  • On the legal principle applied: The Court affirmed that, despite the absence of an express provision in the Second Schedule authorising cancellation of a court-ordered reference under paragraph 3, a Court possesses an inherent power to cancel its own order of reference in a proper case and for good cause shown (for example, credible allegations of arbitrator misconduct). The Court explained that allowing arbitration to proceed when the award would inevitably be set aside would be a miscarriage of justice.
  • Scope and caution: Although the Court recognises inherent power, the opinion (consistent with cited authorities) implies such power should be exercised cautiously and in proper cases; the present judgment upholds the particular exercise of that power on the facts before the Court.
  • No statement was made that a new legal regime or rule supersedes the Schedule; rather, the decision applies inherent jurisdiction in a specific factual context and confirms the order below.

This summary is strictly confined to information contained in the provided opinion text and does not add or infer facts beyond that text.

Show full summary ...

    Lachman Machhua v. Moghal Mian

    Kulwant Sahay, J.:— This is an application in revision on behalf of the defendant in a Small Cause Court suit against an order of the Small Cause Court Judge of Patna, dated the 58th February, 1924, whereby he allowed the plaintiff to withdraw from a reference to arbitration.

    2. The suit was for recovery of a sum of money from the defendant on the ground that the defendant had unlawfully caught fish from a portion of the river Ganges which runs from Sherpur ??? to Dinapur alleging that the plaintiff had the exclusive right of fishing therein and the defendant had no right to do so. The defence was that the defendant had not fished in the portion of the river to which the plaintiff had the exclusive right, but in another portion to which the defendant had a right to fish. Upon an application of the parties the Court by its order, dated the 15th February, 1924, referred the matter in difference between the parties to the arbitration of one Munshi Abdul Ghani; the order was made under para. 3 of the second Schedule to the Code of Civil Procedure. Before the order was communicated to the arbitrator, and before the records were sent to him, the plaintiff filed an application brfore the Court on the 19th February, 1921, wherein he alleged that he had been to see the arbitrator and had informed him of the reference, but that the said arbitrator had demanded money from the plaintiff and had told him that unless he was paid, he would not decide the case in the plaintiff's favour; that the arbitrator seemed to be a dishonest man and wanted to make money by the litigation, and the petitioner, therefore, prayed that the I order of reference he cancelled and the arbitrator be ordered not to decide the case and to return the reference if the same had been forwarded to him. On the same date the defendant filed a petition of objection traversing the allegations made by the plaintiff and objecting to the cancellation of that order of reference. The application came on for hearing on the 25th of February when it was postponed to the 28th of February 1924. On the 26th of February, the plaintiff filed an affidavit of a karpardaz to the effect that in his presence the arbitrator had demanded money from the plaintiff and had to him that the defendant was ready to pay him a sum of Rs. 75 in order that the award might be made in his favour and that if the plaintiff paid a sum of Rs. 100, the arbitrator would make the award in the plaintiff's favour on the 28th of February the learned Judge considered the affidavit and made the order complained of, cancelling the order of reference and allowing the plaintiff to withdraw from reference. Against this order the defendant has come up in revision to this Court and it has been contended on his behalf that once an order of reference had been made by the Court under para. 3 of the second Schedule to the Code of Civil Procedure, the learned Judge had no jurisdiction to cancel that order and to proceed with the trial of the suit.

    3. Reliance has been placed on the provisions of Cl. (2) of pan. 3 which provides that where a matter is referred to arbitration, the Court shall not, save in the manner and to the extent provided in this Schedule, deal with such matter in the same suit; and to para. 5 of the Schedule which deals with cases in which the Court can make an order superseding the arbitration, and it is contended that the arbitration can be superseded only for one or other of the causes set out in para. 5 of the Schedule, and that the Court had no jurisdiction to supersede the arbitration and to cancel its order of reference on the ground stated in the plaintiff's petition, and the allegation of corruption contained in the petition could only be considered after the award had been filed and the matter had come up before the Court under para. 15 of the Schedule.

    4. On the other hand, it has been contended that although there is no specific provision in the second Schedule to the Code of Civil Procedure empowering the Court to supersede an arbitration on the ground set out sin the plaintiff's application before the award is made by the arbitrator, yet the Court has an inherent power to cancel its order if good cause is shown as to why the arbitration should not proceed.

    5. There has been a divergence of opinion on the point.

    6. In the case of Pestonjee Nussurwanjee v. Manockjee & Co.(1), their Lordships of the Privy Council were of opinion that when persons have agreed to submit the matter in difference between them to the arbitration of one or more certain specified persons, no party to such an agreement can revoke the submission ta the arbitration unless for good cause; and that a mere arbitrary revocation of the authority is not permitted. Their Lordships observed: “That the direction of recent legislation, both by the English Acts and the Acts of the Indian Legislature, has been to put an end to the distinction between the agreement to refer, and the authority thereby conferred, which formerly enabled a person who was a party to a binding agreement to revoke the authority thereby conferred, and by so doing to put an end to the agreement for submission to arbitration; and to put such agreement for arbitration on the same footing as all other lawful agreements by which the parties are bound to the terms of what they have agreed to, and from which they cannot retire unless the scope and object of the agreement cannot be executed, or unless it be shown that some manifest injustice will be the consequence of binding the parties to the contract.” Chat was a reference to arbitration under S. 326 of Act VIII of 1859 which corresponds with para. 17 of the second Schedule to the present Code of Civil Procedure, but the principles laid down by their Lordships are of universal application, and according to that principle, a submission to arbitration can be revoked for good cause, and the Court will be justified in superseding the arbitration if it is satisfied that some manifest injustice will be the consequence of binding the parties to the contract.

    7. In Nil Monee Bose v. Mohina Chunder Dutt(2), it was held that a reference to arbitration made under an order of Court cannot be revoked at the instance of a party. That case arose out of a reference to arbitration in a pending suit by the order of the Court. The ??? filed his award in favour of the defendant; the plaintiff thereupon objected on the ground that the arbitrator had omitted to record the evidence of a material witness, who was present and had not examined any witness on the point in issue; the Court thereupon remanded the case to the arbitrator under S. 323 of Act VIII of 1859. The plaintiff then ??? a fresh petition to supersede the reference to arbitration. Upon that application the Small Cause Court Judge, before whom the suit was pending, referred the case to the High Court for opinion on the point as to whether, after once giving free consort to have his case decided upon arbitration, the plaintiff could withdraw his consent and apply to have his case tried by the Court. Sir Richard Couch, C.J, in dealing with this point observed as follows: “With reference to the question which the Judge of the Small Cause Court puts as to the power of the plaintiff to revoke the reference to arbitration, we think that as this arbiration is under an order of the Court, the plaintiff cannot annul or revoke that order, he is bound by it, and the arbitration must proceed subject; to the provisions of law.” Now, it does not appear from the report of the case what reason, if any, the plaintiff gave for withdrawing from the reference and all that was held in that case was that the plaintiff could not annul or revoke the order of the Court. This case does not deal with the powers of the Court to cancel its own order on good case being shown.

    8. The case of Halimbhai Kirimbhi v. Shankersai(3) is, however, a direct authority for the contention raised on behalf of the petitioner. In that case an application for reference to arbitration was made by both parties on the 19th June, 1884 under Section 506 of the CPC (1882) The plaintiff's pleader, however, was not on that date especially authorized in writing by his client to make the application, and the Court ??? making an order until 23rd June, 1884. On the 23rd June, the 1st defendant was absent but the plaintiff's pleader produced his authority and the Court made the order of reference under S. 508 of the Code. On the 27th June, the 1st defendant applied to revoke the authority of the arbitrator and to appoint a new arbitrator on the ground that after signing the application of the 19th June he had come to know that the arbitrator was not worthy of confidence. No order was passed upon this application till after the submission of the award by the arbitrator when it was rejected by the Court. It was held by a Division Bench of the Bombay High Court is that case that the objection raised by the 1st defendant could only be considered after the submission of the award and then only to the extent permitted by S. 521 of the Code of 1882, and that when once a matter is referred to arbitration, it is not competent to the Court under the second paragraph of Section 508 of the CPC (1882) to deal with the matter in difference between the parties, except as provided in Ch. 37 of the Code. It was held that there is no section in that chapter which authorizes the Court to revoke the authority conferred on an arbitrator and to appoint a new man, except in cases falling strictly within the purview of S. 510 of the Code where the scope and object of the reference cannot be executed; and it is only in these cases, apparently, that the authority conferred on arbitrators can be revoked for good cause, the cause being such as is contemplated in that section, as where an arbitrator refuses or neglects, or becomes incapable to act, or leaves British India under circa instances showing that he will probably not return to India at an early date. Now, this case is a direct authority for the proposition that an objection of the kind raised in the present case cannot be entertained by the Court before the submission of the award by the arbitrator. Their Lordships, however, did not consider the inherent power of a Court to cancel an order if it be shown that some manifest injustice will be the consequence of keeping the order in farce. With very great respect to the learned Judges, I am of opinion that although there is no distinct provision in the chapter dealing with arbitration in the Code of Civil Procedure of 1882 as well as in the second Schedule of the present Code of Civil Procedure, still the inherent power of a Court to make proper order for the ends of justice can always be invoked to prevent a miscarriage of justice.

    9. In O.B Coley v. V.A Dacoste(4), it was taken for granted that an application to arbitration can be revoked on good grounds. In Mahomed Wahiduddin v. Hakiman(5), a party to reference to arbitration was held entitled to withdraw from the reference if it transpired after the reference had been made that the arbitrator has been acting am mokhtar of one of the parties without any remuneration. In this case also, it was taken for granted that for good cause a party can be allowed to withdraw from the reference before the award was made. In Kunji Lal v. Banwari Lal(6), a Division Bench of this Court held, where parties submit their difference to arbitration, they cannot be allowed to revoke or withdraw from the submission except for good cause. It was, therefore, conceded that if good cause is shown, a party can be allowed to revoke or withdraw from the submission. In Chaturbhaj v. Baghubar Dayal(7), although it was held that the intention of the second Schedule to the Code of Civil Procedure, is that when once a reference to arbitration has been made under the orders of the Court, that reference should only be superseded for one of the reasons in the schedule itself, and that allegations of corruption against the arbitrator should be dealt with under pin. 15, after the award has been received, yet the learned Judges appear to be in some doubt as to whether or not the Court has an inherent jurisdiction to supersede the arbitration proceedings under its orders, and they proceeded to lay it down that if the Court does possess such inherent jurisdiction the such jurisdiction should be cautiously and sparingly exercised and that an application invoking such jurisdiction should at least suggest grounds for supposing that the applicant will suffer some irreparable injury if prompt action is not taken.

    10. Upon a review of the authorities, I am of opinion that although there is no specific provision in the second Schedule to the Code of Civil Procedure, authorizing a Court to cancel an order made by it under para. 3 of the Schedule, yet in a proper case and for good cause the Court has inherent power to cancel that order. The ground of misconduct of the arbitrator would be a sufficient ground for setting aside the award When made and I fail to see why the Court should allow the arbitration to proceed with the knowledge that the award must inevitably be set aside in the end; and not invoke its inherent power and revoke the submission to arbitration before the award is made. I am, therefore, of opinion that the order passed by the learned Small Cause Court Judge is not without jurisdiction.

    11. This was the only point taken by the learned vakil for the petitioner. It was not suggested in the present case that the cause shown was not a good cause to supersede the arbitration if it could under the law be superseded.

    12. For the reasons given above, I am of opinion that the order passed by the learned Judge in the Court below was not without jurisdiction and cannot be dis turbed. This application is dismissed with costs.

    13. Application dismissed.

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    Comments

    Lachman Machhua v. Moghal Mian
    (Jul 4, 1924)