Patto Kumari v. Upendra Nath Ghosh

1. This application in civil revision is made to us from an order made by the Subordinate Judge of Rajmahal dated 20th August, 1918. It is necessary to state the facts out of which the necessity for the present application has arisen. A suit was instituted in which Bibi Patto Kumari was the plaintiff, and Upendra Nath Ghosh was defendant. The plaintiff was the mother of her minor son, who succeeded to the business of Gopal Chand Rai Darhanpat Singh Baldeo. The defendant was the head gumashta of the business during the lifetime of the minor's father. It is suggested that after the minor's father died, it was found that the defendant had been guilty during the minor's father's lifetime of various acts of dishonesty; and that he had misappropriated moneys belonging to the firm. The allegation by the plaintiff is that the defendant, having been brought to book by her, as guardian of the minor on the death of her husband, consented to execute a hand note to secure the loss sustained by the firm by reason of his alleged defalcations estimated at a sum of Rs. 5,000. The hand note was executed by the defendant in favour of the minor; and was dated 21st October 1912. When the hand-note came to maturity, it was presented for payment and dishonoured, the defendant having failed to pay the sum of Rs. 5,000 due thereon; whereupon the plaintiff, as guardian of her minor son instituted a suit in the year 1915 against the defendant to recover the amount due on the aforesaid hand-note. The aforesaid suit has been referred to in this application as Money Suit No. 2 of 1915.

2. For three years the suit lay in abeyance; and nothing active was done. The mother of the minor was plaintiff in the suit; and Upendra Nath Ghosh, the former head gumashta of the old firm, was defendant. Accordingly litigation having become more or less unsatisfactory, the parties agreed on 26th February, 1918 to submit their differences in that suit to arbitration as being the most competent and convenient form of tribunal to determine and decide the issues in dispute between the parties thereto. The arbitration naturally involved, having regard to its character, the taking of an account; coupled with evidence to prove and to establish that there had been misappropriation of the firm's moneys by the defendant. The Court in which the suit was institued was willing that the matter in dispute between the parties thereto should be referred to arbitration; and an order was made by the “Court on 26th February, 1918, referring the matters in issue to the arbitration of the persons selected and nominated by the parties to the original suit; and the 25th March, 1918 was fixed as the date within which the arbitrators should make their award. Four persons were named as arbitrators; and they all appear to have been gentlemen of worth and position and residents of the district in which the parties to the suit resided, with a knowledge of commercial dealings and the methods of book-keeping. A short time after the matters in dispute had been referred to arbitration, it became quite evident that the arbitrators could not make their award within the time specified by the order of the learned Subordinate Judge dated 26th February, 1918 under R. 3, Sch. 2 of the CPC, and accordingly the learned Subordinate Judge enlarged the time for the arbitrators making their award, for reasons which appeared satisfactory to him, to 25th June, 1918. The award however was not made within that time. The award was actually made on 10th July, 1918 and filed in Court on 12th July, 1918. It is contended before us that inasmuch as the arbitrators failed to make their award within time, that is to say, within or by 25th June, 1918, that therefore the learned Judge had no jurisdiction or option under the rules of the Code of Civil Procedure save and except to set aside the award which was made out of time and filed on 12th July, 1918. If the case stood alone on these facts, there might be some force in the contention presented on behalf of the petitioner. It is necessary however to consider the provisions of the rules with regard to the procedure applicable to arbitration proceedings under the Code of Civil Procedure. R. 1 gives the Court power, when the parties agree to refer a matter pending before a Court of civil jurisdiction to arbitration. R. 3 provides that an order of reference shall be made, and that a time shall be specified within which the arbitrators shall make their award, R. 8 provides that if the award cannot be made within the time specified by the Court by its first order of reference, then the time may be enlarged by the Court from time to time, until such time as the Court shall think fit. R. 15 is the one mainly material for the purposes of our consideration. R. 15 of the present Code differs materially from the old S. 521 of the prior Code. R. 15, Sch. 2 of the CPC, is the rule or order which confers jurisdiction upon Courts acting within their discretion to set aside awards, if an application be made within the time limited, for setting aside an award upon any of the three grounds specified in that rule. Admittedly the present application, so far as the argument addressed before us is concerned, is conversant only with the latter portion of the cause provided for setting aside an award specified in sub-Cl. (c), R. 15, and summarized, the contention is as follows:

That inasmuch as the award was made late and out of time, consequently the award itself is per se void and a nullity; and that therefore there was no jurisdiction in the Court to hold that the award could be operative or binding upon the parties, it having been made out of time, viz., at a date later than 25th June, 1918. Now the essential difference between the old Code and the new Code appears to be this: that whereas the old Code by Section 521 of the CPC, expressly made an award out of time a nullity, the existing rule varies the old section of the prior Code, by providing that if an award is made out of time it only affords a ground or reason for setting aside the award if the parties so desire to assert the right; provided the Court acting, within its discretion is satisfied that the ground upon which the validity of the award is impeached is just and fair, and that in equity and fair dealing it ought and should be set aside. R. 15 therefore does act render an award made out of time per se a nullity; it is merely voidable, and if not sought to be set aside within 10 days from the time when the award is filed, it is binding upon the parties thereto notwithstanding its infirmities.

3. Sir Lawrence Jenkins laid down this principle in the case reported as Shib Kristo Daw & Co. v. Satish Chandra Dutt(1), and authority will also be found in support of the same proposition in the case reported as Khan Singh v. Mohan Lal(2) and in which Rattigan, C.J, referring to the decision of Sir Lawrence Jenkins, already cited, is reported as stating:

“This exposition of the law accords, if I may venture to say so, with my own views as to the-proper interpretation of para. 15, Sch. 2 of the present Code of Civil Procedure; and I accordingly hold that the award before me, though made after the expiration of the period fixed by this Court, was not a mere nullity, and at most was liable to be set aside upon an application by one or other of the parties affected thereby.”

4. It is essentially necessary, in another aspect of this case, to consider and understand exactly the purport and effect of the provisions of R. 15, Sch. 2 of the CPC. Mr. Hasan Imam's contention in this application is mainly founded upon the wording of R. 8, Sch. 2 of the CPC. He contends that when the time for making the award has expired that then the Court only has the power to extend or to enlarge the time for making the award by the arbitrators; and that even then the Court has not got such power when the award itself has been made out of time, and before which time no application has been made to and granted by the Court enlarging the time for making the award; and he relies in support of this proposition upon the judgment of Sir John Harrington: Shib Krishna Dawa & Co. v. Satesh Chunder Dutt(3). It is unnecessary for us in this case to consider the propriety of that decision; but speaking for myself I think it is open to exception; because if you can extend the time for making an award after the time has already expired for so doing, I cannot understand, on principle, why you cannot extend the time even after the award itself has been made, even if made out of time; and it appears to me that R. 8, Sch. 2 of the CPC, may be fairly interpreted as contemplating even such a contingency. On the corresponding English enactment in pari materia with the rules as to arbitrations provided by the Code of Civil Procedure, it has been so held: Parker v. Smith(4), May v. Harcourt(5), Lord v. Lee(6) and Warner, In re(7). However the main contention before us, asserted by Mr. Hasan Imam, is that the jurisdiction to extend the time or to enlarge the time is vested only in one person, viz., the Judge as a Court. R. 8 provides

“that the Court may, if it thinks fit, either allow further time, and from time to time either before or after the expiration of the period fixed for the making of the award, enlarge such period.”

5. Mr. Hasan Imam contends that this is a statutory obligation and duty, and that it must be performed by the person or forum nominated by what is in effect a statute; and that it is not open or possible to enlarge the time for making an award by any collateral means whatsoever, whether arising from the conduct of the parties or otherwise. I agree with Mr. Hasan Imam's argument to this extent: that I think that the Court is the person primarily designated and intended to be the source by whose authority the time is to be enlarged. I am of opinion that if the arbitration proceedings in this case had been conducted with any degree of regularity and propriety, the parties thereto would have applied to the learned Judge as the person empowered by statute to enlarge and extend the time to validate the award. But I cannot accede to the argument that the function vested in the Court, as to its right to enlarge the time for making an award under R. 8, is mandatory and imperative and that no other circumstances can be fairly considered, arising from the conduct of the parties, which would justify an inference that the parties intended and impliedly agreed that even though the time for making the award was not extended by the Court, that the arbitrators could not make their award even though literally out of time. The power vested in the Court is discretionary and permissive, but it does not negative the right to extend time by agreement impliedly agreed to and acquiesced in between the parties to the arbitration proceedings.

6. Whatever be the true construction of R. 8, we feel also obliged to consider the conduct of the parties to the arbitration prior and subsequent to 25th June, with a view of seeing whether established principles of law are applicable to cases such as the present, which enable Courts of justice, in the exercise of their equitable jurisdiction, to overcome technicalities and maintain the validity of an award, though literally voidable by the commission of some error in the making and framing of the award itself. The time ultimately fixed by the Court for making the award was 25th June. The plaintiff applied to the arbitrators on 16th June for time asking by her petition for a week's adjournment. A week's adjournment was granted; and an adjournment was allowed up to 20th June. On 23rd June the plaintiff filed a further petition seeking an adjournment. By this petition the plaintiff applied for a fortnight's time. The plaintiff must be deemed to have known that when her advisers applied on 23rd June for a fortnight's adjournment, that they were applying for an adjournment of the hearing of the arbitration proceeding to a date long after the date fixed for the making of the award by the arbitrators. The arbitration Court considered the application for the adjornment applied for by the plaintiff on 23rd June; and adjourned the further hearing of the arbitration proceedings to 7th July, 1918. The reasons which induced the plaintiff to apply for an adjournment on 23rd June are fully set out in her petition; and the arbitrators in yielding to the prayer of the petitioner stipulated by their order that the plaintiff was to pay as and for the costs of the adjournment the sum of Rs. 30. It is suggested in the above-mentioned petition that the arbitration proceedings, between 16th and 28th June, were adjourned by the act of the arbitrators, behind the back of the petitioner, to 7th July. I find no warrant in support of this contention, save and except the uncontradicted averment contained in the plaintiff's petition of 23rd June. There is no entry in any record made by the arbitrators allowing any adjournment to 7th July, save and except the order made on 23rd June referred to above on the plaintiff's petition.

7. The plaintiff having secured the adjournment she desired to 7th July, appeared on that day before the arbitration Court, and proceeded to examine witnesses and to present further facts in evidence in support of her case for the arbitrators' consideration. It would appear that the hearing of the arbitration finally concluded either upon 7th July or 6th July, and the arbitrators after a short interval for consideration made their award on 10th July; and this is the award the validity of which is sought to be impeached by this application. The award is short; and in its effect it dismisses the plaintiff's claim as being un-supportable and founded upon improbabilities, and probably fraudulent in its conceptions. Now though one may admit that the civil Court is the proper authority to extend the time within which an award is to be made by arbitrators, if a regular method of procedure was pursued, yet I think there is a rule well recognized and established, in the nature of an estoppel, that if the parties to an arbitration proceeding by their conduct lead arbitrators to think and believe that even though the time for making their award has in fact expired, that they (the arbitrators) should continue the proceedings, and to which course the parties must be deemed to have assented, by acquiescing in taking part in such proceedings; that then, though the time for making the award may have expired, the jurisdiction of the arbitrators would be deemed to continue to validate and give effect to the award. Courts of justice and equity have held that such conduct on the part of the parties to an arbitration estops them from impeaching the award upon the ground that it is invalid or could be fairly set aside on the mere technical ground that the award itself was merely made out of time.

8. There is a long uniform line of authority to be found in the English cases supporting this view of the law. I shall refer to one or two.

9. It is difficult to distinguish the English cases in principle from the law applicable to arbitration proceedings in India; because the Code of Civil Procedure is very much akin, and very alike, in its terms to the procedure provided by the co-responding statute in England, generally known as the Common Law Procedure Act, which applies to arbitration proceedings of such a character as we have in this case; viz., arbitration proceedings in respect of a matter which affects the subject-matter of a suit pending before a Court of justice.

10. If the law in this country is founded upon equity and good conscience I see no reason why we should not apply the principles laid down by the authority of English case law sanctioned by a host of great and distinguished Judges, to the law applicable to arbitration proceedings in this country, when the Acts regulating the procedure of arbitration Courts in both countries are analogous and akin one with the other; and why we should not also apply the equitable doctrines which have been applied and administered by the Court of Chancery in England in such matters for well nigh 100 years: If the law in this country is to be administered on the basis of equity and good conscience, then certainly say it is not equity, nor is it in keeping with good conscience that a party to an arbitration proceeding should invite a Court of arbitrators to do a certain act for his benefit and advantage; and when he has gained such benefit and advantage, but failed to secure final success in the proceeding itself, that such person should be permitted to repudiate the award of the arbitrators solely and only on the ground that, because the arbitrators conceded to him the benefit he sought, and of which he availed himself; that thus their award is so vitiated by such transparent illegality as to coerce a civil Court to set aside the award so made. To my mind such conduct, if permitted would lend sanction to a fraud being committed on the arbitrator, and would be grossly unjust and inequitable towards the other party to the arbitration proceeding who by consenting to the arbitrators continuing to act, whether expressly or impliedly has acquired by the result of the proceedings a valuable right of which he ought not to be hastily deprived.

11. I desire to refer in support of our view to the well known case of Tyerman v. Smith(8). It is necessary to observe that in the several cases I shall cite it will be found that the cases mainly turned for their decision upon the provisions applicable to arbitration proceedings under the Common Law Procedure Act which contains provisions and a procedure very analogous to that provided by the Code of Civil Procedure. That statute, that is to say, the Common Law Procedure Act, provides that every arbitration award to be made by arbitrators to whom a reference has been made under that statute must be made within one month after the arbitrators have been appointed unless the time is enlarged in accordance with the provisions of the statute. Unless the statutory provisions are complied with the award is liable to be set aside; or the Courts may, while refusing to enforce it by attachment or otherwise decline to set it aside.

12. In Tyerman v. Smith the award was not made for three months after the time provided by the statute; and the reason for the delay was because the parties had by their conduct acquiesced in the arbitrators continuing to exercise their jurisdiction by proceeding with the arbitration, and in making their award out of time, and the Court in that case presided over by the three distinguished Judges, Lord Campbell, Coleridge and Erle, laid down what has been consistently followed since in later cases as the guiding rule to be applied in such circumstances. Lord Campbell says:

“I proceed on the ground that the plaintiff is estopped by his conduct from objecting that there was no written consent for the enlargement of time. It is contended that the statutable authority does not exist. I think the plaintiff is estopped from saying that there was no such written consent as was essential to the statutable authority.”

13. In Watson v. Bennet(9) a similar principle was applied to similar facts, and Lord Brainwell in that case said:

“Assuming that Mr. Gray is right in the suggestion that by the order of reference made by my brother Channell, the arbitrator's power was regulated by S. 15, and that, notwithstanding the special clause in this order, he had no power of enlarging the time other than that given by that section, and assuming that there was no valid enlargement under that section, and that the parties by their conduct have done no more than consent to proceed after the three, months, still the award may be good. It may be that attending before the arbitrator after the arbitrator's powers had ceased was evidence of a new parol submission. If there was a good parol submission, though the award may not be enforceable under the statute, it may be capable of being enforced by action; therefore it is clear that we ought not to set it aside.”

14. The following authorities may also be referred to: Reade v. Dutton(10), R. v. Hill(11) and Hick, In re(12). In Earl of Darnley v. London, Chatham and Dover Railway Co.(13), their Lordships of the House of Lords recognized this principle as applicable to arbitration proceedings. They distinguished the case then before them in its facts from the decision in Hick, In re, which was then under consideration; and at p. 57 of (1867) 12 H.L of the report the Lord Chancrello says:

“This is not at all like the case which was-cited in argument where an arbitrator not having enlarged the time for making his award, the parties notwithstanding attended meetings and were thereby held to have recognized his authority as continuing.”

15. The principle underlying these decisions appears to be that where parties attend and recognize that the arbitrators have jurisdiction to continue the arbitration, even though the time for making the award has expired, that then they are estopped by their conduct from seeking to impugn the arbitrator's award on the ground that it is invalid by reason of being out of time. Therefore we think that, on the patent facts of this case, that the petitioner is estopped from impeaching the award made upon the 10th July on the ground that it was out of time, no order enlarging the time for making the award having been made by the Court under Sch. 2, R. 8(2) of the CPC for these reasons therefore we think that the learned Judge was right and justified in law in arriving at the conclusion he did on the facts, and that his order has not been vitiated by any illegality which would justify our interference in civil revision. However we are of opinion that in an application in civil revision under Section 115 of the CPC, the petitioner is not entitled to the redress she seeks in a case such as the present. I have already pointed out that an award under R. 15, Sch. 2 of the CPC, is not per se void, but it is only voidable. Considering whether an award is voidable or not, the Court in inquiring into such a matter has to consider mixed questions of law and fact. If a Court bona fide in the exercise of the jurisdiction, which it undoubtedly possesses in such cases, decides honestly some matters of fact or law erroneously, even though such decision may involve a determination as to the regularity or irregularity of some method of procedure, this determination would not necessarily render applicable the provisions of Section 115 of the CPC, because a Court having jurisdiction even if it erroneously exercises such jurisdiction honestly but mistakenly, such fact would not necessarily justify interference by the High Court in civil revision under the powers conferred by Section 115 of the CPC. The Privy Council have more than once laid it down that a Tribunal having jurisdiction is at liberty to decide a point of law or fact erroneously without having its decision open to review in civil revision.

16. Accordingly for this reason also we are of opinion that this application must fail. We think this application was improperly admitted in the first instance and we dismiss it now with costs measured at a sum of three gold mohurs.

V.S/R.K

17. Application dismissed.