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Tara Prasad Baliasey And Others v. Baijnath Prasad Baliasey And Another
Judgment Summary — Chatterji, J. (with Harries, C.J. concurring)
Factual and Procedural Background
This appeal arises from an order refusing to make a reference to arbitration on the appellants' application under para. 17, Schedule 2 of the Code of Civil Procedure (CPC). The parties are members of a joint Mitakshara family: Appellant 1 is the father of the other appellants and the elder brother of Respondent 1; the other respondents are the sons of Respondent 1.
The appellants relied on an agreement dated 11 May 1937 between Appellant 1 and Respondent 1 providing that disputes regarding division of their joint family properties be referred to four specifically named arbitrators. The arbitrators made some attempt to proceed but, owing to laches of the parties, could not continue. The respondents thereafter filed a partition suit (No. 1 of 1938) against the appellants.
The appellants applied under para. 17 to file the 1937 agreement in Court and to obtain an order of reference. The respondents opposed the application, principally on the ground that the arbitrators had refused to act and give their award. At the hearing, three of the named arbitrators gave evidence supporting the respondents' version. The subordinate Judge accepted that evidence and dismissed the appellants' application. The appellants appealed from that order.
Legal Issues Presented
- Whether, under para. 17(4) of Schedule 2, Code of Civil Procedure, the Court is bound to make an order of reference to the arbitrators named in a filed agreement when those arbitrators (or some of them) refuse to act.
- Whether the Court may, before making an order of reference under para. 17, exercise the power in para. 5 (to appoint an arbitrator where an arbitrator refuses or neglects to act) and thereby substitute or appoint new arbitrators in place of the named arbitrators.
- Whether para. 19 of Schedule 2 makes the provisions of para. 5 applicable so as to permit the Court to appoint substitute arbitrators prior to making an order of reference under para. 17.
- Whether the 1937 agreement would be binding on minor parties to the partition suit (specifically the minor sons of the younger brother), given the allocation of shares in the agreement.
Arguments of the Parties
Appellants' Arguments
- Dr. D. N. Mitter (on behalf of the appellants) contended that the grounds relied on by the Court below for refusing to make an order of reference were not "sufficient cause" within the meaning of para. 17 of Schedule 2, CPC.
- Dr. Hitter's contention (as stated in the opinion) was that "sufficient cause" under para. 17(4) does not contemplate the present situation; that once the Court found a valid agreement it was bound to make a reference; and that, even if some of the arbitrators were unwilling to proceed, the Court could, by exercising powers under para. 5, appoint new arbitrators in their place.
Respondents' Position (as represented in the opinion)
- The respondents opposed the application principally on the ground that the arbitrators refused to act and give their award; three arbitrators gave evidence supporting the respondents' version and the subordinate Judge accepted that evidence and dismissed the application.
- Mr. B.C. Defor (for the respondents) cited authorities (54 Mad 469; 9 Luck 321; ILR (1937) 2 Cal 434) supporting the proposition that where parties name specific arbitrators without provision for substitution, the agreement may become inoperative if an arbitrator dies or refuses to act and the Court cannot substitute arbitrators under para. 5 prior to or for purposes of making an order under para. 17.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| 19 ALJ 823 | Observed (by Walsh, J.) that if arbitrators are unwilling to act the Court, under para. 5, can appoint substitutes and then refer the matter to arbitration. | The Court rejected this view as expressed by Walsh, J., holding that para. 5 can operate only after an order of reference has been made under para. 17 and therefore cannot be used to appoint substitutes before making the order of reference. |
| 44 All 523 | Decision where Walsh, J. was one of the Judges; expressed willingness to treat the absence (death/refusal) of a named arbitrator as equivalent to there being no provision, thus permitting substitution. | The Court characterized that as an extreme view not justified by the clear provisions of para. 17(4) and refused to accept it as correct law for the present context. |
| 48 All 27 | Question whether an order revoking a reference under para. 17 was appealable; Sulaiman, C.J. referred to 19 ALJ 823 and 44 All 523. | The Court noted that 48 All 27 does not appear to have approved the earlier cases (19 ALJ and 44 All) and did not treat it as supporting the appellants' contention. |
| 54 Mad 469 | Held that where parties agreed privately to refer disputes to certain named arbitrators and one arbitrator died during proceedings, the agreement became inoperative and could not be filed under Para. 17, Sch. 2, CPC. | The Court relied on this authority in support of the view that an agreement naming arbitrators without provision for substitution becomes inoperative if the named arbitrators cannot act, and thus the Court cannot file it under para. 17. |
| 9 Luck 321 | Held that agreement to refer to specified arbitrators becomes void if one or more arbitrators die or refuse to act, making performance impossible; para. 5 can operate only after an order of reference under para. 17. | The Court considered this case as correctly stating the law and applied its principle to conclude the Court had no jurisdiction under para. 17(4) to make a reference to only those arbitrators who were willing to act. |
| ILR (1937) 2 Cal 434 | Held that an agreement to have disputes settled by certain ascertained persons is different from an agreement to go to arbitration via the Court; the Court has no power under para. 5 to appoint a new arbitrator in place of one declining to act in proceedings following filing of the award under para. 20. | The Court relied on this authority for the proposition that the Court cannot substitute an arbitrator named by the parties themselves and treated it as supporting the view that para. 5 does not permit substitution in the circumstances of a para. 17 filing. |
| 12 MIA 112 | Decided that where persons agreed to submit differences to one or more specified arbitrators, no party could revoke the submission except for good cause; arbitrary revocation was not permitted. | The Court observed that this case was of no assistance to the appellants' position and did not rely upon it to justify substitution of arbitrators. |
Court's Reasoning and Analysis
The Court began by distinguishing two distinct procedures within Schedule 2 of the CPC: paras. 1–16 concern "arbitration, in suits" (i.e., references arising in pending suits), whereas paras. 17–19 concern "order of reference on agreements to refer" (i.e., private agreements sought to be filed in Court). The Court emphasized that where parties have a private agreement naming specific arbitrators and make no provision for substitution, the Court cannot, when entertaining an application under para. 17 to file that agreement, go beyond the terms of the agreement.
Clause (4) of para. 17 was read as requiring that the reference be made "to the arbitrator appointed in accordance with the provisions of the agreement." Because the agreement in this case specifically named four persons as arbitrators and contained no provision for substitution, the Court concluded it could not substitute other persons in their place.
The Court rejected the appellants' contention (relying on para. 5 and certain authorities) that the Court could appoint substitute arbitrators prior to making an order of reference. Paragraph 5 provides a mechanism to appoint an arbitrator where an arbitrator refuses or neglects to act, but the Court read para. 5 as operating only after an order of reference (i.e., under a proceedings context) has been made. Para. 19 was considered: it makes "the foregoing provisions" (paras. 1–16) applicable to proceedings under an order of reference made under para. 17, but it does not permit the Court to exercise the para. 5 powers before making the order of reference. To allow otherwise would render para. 19 meaningless and would improperly extend the Court's powers beyond what the parties agreed.
The Court examined precedents that supported the appellants' view (19 ALJ 823 and 44 All 523) but explicitly disagreed with them, labeling the view that the Court could treat a dead or recalcitrant named arbitrator as if there were no provision an "extreme view" not justified by para. 17(4). The Court accepted authorities (54 Mad 469; 9 Luck 321; ILR (1937) 2 Cal 434) that hold that an agreement naming specific arbitrators becomes inoperative if those arbitrators die or refuse to act and that the Court cannot substitute arbitrators under para. 5 in the context of filing an agreement under para. 17.
The Court also identified a separate substantive objection: the agreement between the two brothers purported to give the elder brother more than ten annas of the joint family property and the younger brother (and thus potentially his minor sons) would accept a reduced share. The Court noted a "serious question" as to whether such an agreement would be binding on the minor sons of the younger brother, who are parties to the partition suit and to the present para. 17 proceeding.
On these grounds (inability to substitute arbitrators under para. 17 where none were provided for and doubts about binding minors), the Court concluded that the subordinate Judge was right to refuse the order of reference.
Holding and Implications
HOLDING: The appeal is dismissed. The Court held that the subordinate Judge was correct in refusing to make an order of reference under para. 17, Schedule 2, Code of Civil Procedure.
Implications:
- The direct effect is that the application to file the 11 May 1937 agreement and to obtain an order of reference was refused and that refusal is upheld on appeal; the appeal was dismissed with costs.
- The Court held that where a private agreement names specific arbitrators and contains no provision for substitution, the Court cannot, when considering an application under para. 17, substitute other arbitrators by invoking para. 5 prior to making an order of reference.
- The opinion endorses the view that such an agreement may become inoperative if the named arbitrators die or refuse to act, and therefore may not be capable of being filed under para. 17; it also highlights concerns about whether arrangements that alter normal shares could bind minors who are parties.
- The judgment applies and relies on existing authorities opposed to substitution under para. 17 and expressly rejects other authorities to the contrary; the opinion does not state that it is creating a new, distinct precedent beyond its application of the cited authorities to the facts of this case.
Disposition: Appeal dismissed. Harries, C.J. concurred.
Chatterji, J.:— This is an appeal from on order refusing to make a reference to arbitration on the appellants' application under para. 17, Sch. 2, Code of Civil Procedure. Appellant 1, who is the father of the other appellants, is the elder brother of respondent 1 of whom the other respondents are the sons. The parties are members of a joint Mitakshara family. The application under para. 17 was to the effect that there was an agreement, dated 11th May 1937, between appellant 1 and respondent 1 to refer their disputes regarding the division of their joint family properties to the arbitration of four gentlemen named in the agreement. There was some attempt by the arbitrators to carry on the arbitration, but owing to the laches of the parties they could not proceed in the matter. Afterwards the respondents filed a partition suit (No. 1 of 1938) against the appellants. Thereupon the appellants presented their application under para. 17 praying that the agreement, dated 11th May 1937, be filed in Court. The application was opposed on various grounds, the most important of which is that the arbitrators refused to act and give their award. At the hearing three of the arbitrators gave evidence in support of the respondents' version. The learned subordinate Judge, accepting their version, dismissed the application. Dr. D.N Mitter on behalf of the appellants contends that the grounds on which the Court below has refused to make the order of reference were not sufficient within the meaning of para. 17 of Sch. 2, Code of Civil Procedure. The relevant portion of that paragraph is cl. (4), which is as follows:
Where no sufficient cause is shown, the Court shall order the agreement to be filed and shall make an order of reference to the arbitrator appointed in accordance with the provisions of the agreement or, if there is no such provision and the parties cannot agree, the Court may appoint an arbitrator.
2. Dr. Hitter's contention is that “sufficient cause” under this clause does not contemplate the position that has arisen in the present case. According to him, the Court, when it found that there was a valid agreement, was bound to make a reference, and he suggests that, although some of the arbitrators are not willing to proceed with the arbitration, the Court may, in exercise of its powers under para. 5 of the same schedule of the Code of Civil Procedure, appoint new arbitrators in their place.
3. It will be necessary here to refer to para. 5 which provides, among other things, that where an arbitrator refuses or neglects to act or becomes incapable of acting any party may serve the other party or the arbitrators, as the case may be, with a written notice to appoint an arbitrator and then if, within seven clear days after such notice has been served or such further time as the Court may in each case allow, no arbitrator is appointed, the Court may, on application by the party who gave the notice, and after giving the other party an opportunity of being heard, appoint an arbitrator.
4. It is, however, to be observed that paras 1 to 16 of Sch. 2 relate to “arbitration, in suits,” whereas paras. 17 to 19 relate to “order of reference on agreements to refer.” It cannot be seriously disputed that there; is some difference between the procedure that is to be followed where the reference to arbitration is made in a pending suit and where there is a mere agreement for reference to arbitration which is sought to be filed in Court. In the latter case, the Court obviously cannot go beyond the terms of the agreement, and if it specifies the persons who are to be appointed arbitrators and makes no provision for the case where the arbitrators refuse to act, the Court cannot substitute in the place of the named arbitrators certain other persons. Clause (4) of para. 17, which I have already quoted, makes it clear that the reference should be made “to the arbitrator appointed in accordance with the provisions of the agreement.” In the present case, four persons were specifically named as arbitrators in the agreement. That being so, I do not see how in the face of the clear provision of Cl. (d) of para. 17, a Court can substitute anybody else in their place. Dr. Mitter invites our attention to para. 19 of the same schedule of the Code of Civil Procedure, which runs as follows:
The foregoing provisions, so far as they are consistent with any agreement filed under para. 17, shall be applicable to all proceedings under the order of reference made by the Court under that paragraph, and to the award and to the decree following thereon.
5. It is contended that by the operation of this paragraph the provisions of para. 5 will apply to the present case. This contention, to my mind, is quite untenable. What is actually meant by para. 19 is that where there is an order of reference made by the Court under para. 17 “the foregoing provisions” shall be applicable to all proceedings under the order of reference. It by no means follows that the Court, before it is competent to make an order of reference, can exercise the powers conferred under para. S. Otherwise, it would be stultifying, the very provisions of para. 19. Dr. Mitter in support of his contention relies upon 19 ALJ 823,1 44 All 5232 and 48 All 27.3 In 19 ALJ 823 the facts were that it was not known whether the arbitrators named in the agreement were actually willing to proceed with the arbitration. The trial Court dismissed the application on the ground that the plaintiff had no cause of action. On appeal, it was held that before the application could be dismissed it should be ascertained whether in fact the arbitrators were unwilling to act. The case was therefore remanded to ascertain the real facts. In the course of the judgment, however, Walsh, J. observed that if any of the arbitrators was unwilling to act, the Court in exercise of its powers under para. 5 can appoint somebody else in his place and then refer the matter to arbitration. With all respect to the learned Judge, I am unable to agree with his view. As I have already pointed out, para. 5 can come into play only after there has been an order of reference made by the Court. The same view was followed in 44 All 523 where Walsh, J. was one of the Judges who decided it. In this case the learned Judges go further and state:
If it were necessary, we should be prepared to hold that the words in para. 17, sub-cl. (4) (which enables a Court to make an order of reference to a particular arbitrator at the time of filing the reference) if there is no such provision and the parties cannot agree, cover a case where there has been a provision for a particular arbitrator who is either dead or retired. If he has died or refused to act, it is as though there was no provisions.
6. With all respect I must say this is an extreme view which is not justified by the clear provisions of clause (4) of para. 17. The decision in 48 All 27 does not really support the contention of Dr. Mitter. There the question was whether an order revoking a reference under para. 17 was appealable. In the course of the judgment Sulaiman, C.J referred to the decisions in 19 ALJ 823 and 44 All 523, but it does not appear that he approved of those cases. On the other hand, Mr. B.C Defor the respondents has referred to the cases in 54 Mad 469,4 9 Luck 3215 and ILR (1937) 2 Cal 434.6 These cases support the view which I have already expressed. In 54 Mad 469, the parties privately agreed to refer their disputes to certain named arbitrators, but the agreement did not contain any provision as to what should be done in case any of the arbitrators died in the course of the arbitration proceedings, and one of them died in the course of such proceedings. It was held that the agreement became inoperative and came to an end on the death of the arbitrators and that it could not therefore be filed in Court under Para. 17 of sch. 2, Code of Civil Procedure.
7. In. 9 Luck 321 it was held that an agreement to refer a matter to certain specified arbitrators becomes void and of no effect if one or more of the arbitrators dies or refuses to act and thus makes the agreement incapable of performance, and in such a case the Court has no jurisdiction under clause (4) of Para. 17 of sch. 2, Code of Civil Procedure to make a reference to the arbitrators who are willing to act. In this case it was pointed out that Para. 5 can come into operation only when an order of reference has already been made under Para. 17. This, to my mind, is the correct view of the law. In ILR (1937) 2 Cal 434, it was held that
an agreement to have a dispute settled by one or more individuals is one thing, and an agreement to go to arbitration rather than to litigation in the Court is another. Where, by an agreement, parties decide to settle disputes by the arbitration of ascertained persons without the intervention of the Court, in a proceeding following the filing of the award under para. 20 of Sch. 2, Code of Criminal Procedure, the Court has no power under para. 5 to direct the appointment of a new arbitrator in the place of one declining to act.
8. No doubt it was held in this case that Para. 5 will have no application even after the order of reference is made under Para 17. It is unnecessary for the purposes of this case, to decide whether that view is correct or not. The case however is an authority for the proposition that the Court cannot substitute any arbitrator in the place of the arbitrator named by the parties themselves in their agreement. Dr. Mitter also referred to the case in 12 MIA 112;7 but that case merely decided that where certain persons agreed to submit their differences to the arbitration of one or more specified persons, no party to such an agreement could revoke the submission to arbitration unless for good cause, and that a mere arbitrary revocation of the authority could not be permitted. This case is therefore of no assistance to the appellants. There is another serious objection to the filing of the agreement. The agreement was between the two brothers, and the parties to the partition suit include their minor sons also. In fact, the minor sons also are parties to the present proceeding under Para. 17 of Sch. 2, Code of Civil Procedure. From the agreement it appears that the elder brother is to get more than ten annas in the joint family properties. A serious question may arise as to whether this agreement would be binding on the minor sons of the younger brother who agreed to take a little over five annas in the place of eight annas which would be his normal share. For the reasons which I have given above, I am of opinion that the Court below was quite right in refusing to make an order of reference. I would accordingly dismiss the appeal with costs.
Harries, C.J:— I agree.
D.S/R.K
9. Appeal dismissed.
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