Mootham, J.:— This is an appeal under section 39 of the Arbitration Act, 1940, from an order dated the 22nd January, 1942, of the Civil Judge of Gorakhpur refusing to set aside an award made on a reference under that. Act.

The appellants together with the respondents and three other persons were the co-owners of a sugar factory at Bhatni. On the 12th December, 1938, the appellants and the three persons last mentioned executed a deed, whereunder they leased, subject to the terms and conditions therein set out, their respective shares in the sugar factory to the respondents for a term commencing on that date and ending on the 31st October, 1939. Differences subsequently arose between the appellants and the respondents, and on the 18th March, 1940, the appellants filed a suit, No. 8 of 1940 of the court of the Civil Judge of Gorakhpur (herein referred to as Suit No. 8), against the respondents for various reliefs, including the payment of a large sum of money, to which they claimed they were entitled under the terms of the lease.

In their written statement filed on the 18th April, 1940, the respondents admitted liability in respect of part of the sum claimed, but they alleged that the parties had, by an agreement executed some years previously, agreed to submit all disputes between the co-owners of the sugar factory to arbitration. On the 18th May, 1940, the respondents applied to the Civil Judge under-section 34 of the Arbitration Act for a stay of the proceedings in suit No. 8. Although this application was made some time after the respondents had filed their written statement the application was allowed to this extent, that by an order dated the 20th July, 1940, the court directed that the proceedings be stayed for a period of one month.

There were at this time two other suits, Nos. 28 and 35 of 1940 of the court of the Civil Judge of Gorakhpur, pending between the appellants and the respondents, and in each of these suits the court, on the application of the respondents, made a similar order staying further proceedings. Against these three stay orders appeals were filed in this Court, the appeals being numbered respectively First Appeal from Order No. 168, First Appeal from Order No. 150 and First Appeal from Order No. 151 of 1940.

On the 8th November, 1940, these three appeals came on for hearing, and the court was then informed that the parties had settled all their differences and that the terms of settlement had been incorporated in a compromise agreement which they desired to file in court. This agreement provided, inter alia, that Suits Nos. 28 and 35 were to be withdrawn and that the amount due to the appellants in Suit No. 8 should be determined by an arbitrator, Mr. Chaturvedi. This Court thereupon directed that the compromise be filed and that a decree be drawn up in its terms. This Court also, at the request of the parties, gave certain further directions, which were duly incorporated in the decree, for the purpose of implementing the compromise. One of these directions was the appointment of Mr. Chaturvedi as arbitrator to determine, within a period of one month from the date of the decree, the amount due to the appellants in Suit No. 8.

Mr. Chaturvedi thereupon proceeded to conduct the arbitration and in due course his award was filed in this Court. By this award the arbitrator held that not only was there no sum due from the defendants to the plaintiffs in Suit No. 8 but that the defendants were due to be paid by the plaintiffs the sum of nearly one lakh of rupees, and he recommended that the suit be dismissed. Both parties filed objections in this Court to the award. The Court, however, was of opinion that the award ought to have been filed in the court of the Civil Judge of Gorakhpur, and by an order dated the 21st March, 1941, it directed that both the award and the objections be referred to that Civil Judge for disposal. This was clone: the Civil Judge heard arguments and on the 22nd January, 1941, he dismissed both sets of objections and directed that a decree in the terms of the award be prepared. It is against this order and decree that the present appeal has been filed, the contentions of the appellants falling under three main heads. It is said, first, that this Court had no jurisdiction to refer the matter in dispute in Suit No. 8 to arbitration, secondly, that if it had jurisdiction to make the reference, it was this Court and this Court alone which could dispose of the objections to the award and make a decree in the terms thereof, and, lastly, that the arbitrator had misconducted the proceedings within the meaning of clause (a) of section 30 of the Arbitration Act.

The first of these arguments has two branches, for it is argued that an appellate court has no power under the Arbitration Act to make a reference at all to arbitration, or that if it has such power, the reference it so makes must be limited to such matter as is before it in the appeal in which the order of reference is made; and accordingly that this Court has no power, in an appeal in which the sole question for determination was the propriety of a stay order, to refer to arbitration the subject-matter of the suit in the court of first instance.

The question whether an appellate court has power under the Arbitration Act, 1940, to make a reference to arbitration is one of some interest, and we have not been referred to any case in which the question has been considered. In the case of arbitration in suits an order of reference is made under section 23 of the Act by the court to which an application for that purpose is made by the parties under section 21. That section, which is in terms almost identical with those of sub-paragraph (1) of paragraph 1 of the repealed second schedule to the Civil Procedure Code, reads as follows:

“21. Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration they may at any time before judgment is pronounced apply in writing to the court for an order of reference.”

There is no doubt that under the provisions of the Civil Procedure Code an appellate court was empowered to make an order of reference, but it was so empowered, not by anything contained in the second schedule, but by the provisions of sub-section (2) of section 107 of the Code which conferred, upon an appellate court the same powers, and imposed on it as nearly as maybe the same duties, as were conferred or imposed by that Code on courts of original jurisdiction. Now there is not to be found in the Arbitration Act any section corresponding to sub-section (2) of section 107 of the Civil Procedure Code., and although under section 41 of the former Act the provisions of the Code are generally made applicable to all proceedings before the court, and to all appeals under that Act, this does not in my opinion any the matter further, for sub-section (2) of section 107 has ceased to have application to matters falling within the ambit of the Arbitration Act as the duties or powers which are thereby conferred or imposed on an appellate court are limited to such as are conferred or imposed by that Code on courts of original jurisdiction.

Had sections 21 and 23 of the Arbitration Act stood alone I should have been inclined to hold that the term “suit” included an appeal [see Chiranji Lal v. Jamna Das(1)] and accordingly that “court” embraced an appellate court, but I think we are precluded from taking chat view by the fact that the term “court” is itself defined in section 2 of the Arbitration Act as meaning:

“a civil court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under section 21, include a small cause court.”

Now, in this definition I think that the word “suit” can only have the more technical and restricted meaning of a proceeding instituted in a court of first instance by a plaint or in such other manner as may be prescribed. In other words “court” for the purposes of the Arbitration Act means a civil court having jurisdiction to decide, as a suit, the questions forming the subject-matter of the suit. This is not a power which is possessed by an appellate court as such, and in particular it is not a power which is possessed by this High Court which under its Letters Patent has no original civil jurisdiction in respect of a dispute of the nature which formed the subject-matter of the reference to arbitration in this case. In my opinion, therefore, the appellants' contention is right, and so much of the decree of this Court dated the 8th November, 1940, as constituted a reference to arbitration of the matters in dispute in Suit No. 8 was not in accordance with law.

The question which then arises is whether that part of the decree of this Court of the 8th November, 1940, which, in my view, it had no power to make, is binding upon us in the present appeal, and it has been strenuously contended on behalf of the respondents that decree is final and cannot now be called in question. Reliance was placed upon the decisions in Hans Raj v. Bijai Ram Singh and Abdul Wahab v. Rokia Bibi(2) but these decisions, for reasons which I mention below, do not, in my opinion, support the respondents' case. For the other side it is contended that the decree, so far as it purported to refer any question to arbitration, was made without jurisdiction and is, therefore, a nullity and not binding upon us.

The true position can, I think, be put shortly. On the one hand a decree or order made by a court in respect of a matter which it has jurisdiction to entertain, whether in the exercise of its original jurisdiction or on appeal, is either final or will become final if an appeal lies therefrom and no appeal is lodged: Ram Kirpal v. Rup Kuari(3). On the other hand, if the court has no inherent jurisdiction over a particular matter the parties cannot, even by consent, convert the proceedings before the court, into a proper judicial process; Ledgard v. Bull. Reference was also made in the course of argument to the recent decision of the Privy Council in Chhabba Lal v. Kallu Lal. That case is not, I think, of very much assistance, for although the validity of a reference to arbitration was in question, all that their Lordships held on this matter was that an invalid award, being a nullity, can be challenged in any appropriate proceedings and that, therefore, an appeal (in the circumstances) lay to the High Court.

The two general propositions to which I have referred do not, I think, admit of doubt, but it is said by Mr. Shambhu Prasad that in this case this Court had on the 8th November, 1940, jurisdiction to decide the appeal then before it, and that the whole of the decree which followed upon the judgment in that appeal has, therefore, become final. As regards the two cases upon which he relies, it was held in Hans Raj v. Bijai Ram Singh that a decision in a suit given in an interlocutory matter, if not appealed from, was binding upon the parties in every subsequent proceeding in that suit, and in Abdul Wahab v. Rokia Bibi that the principle of res judicata was applicable to all orders passed in the same suit between the same parties when the question arises in subsequent proceedings in the suit. In both these cases, however, it is clear that the order the validity of which was questioned was made by the court in the exercise of a jurisdiction which it undoubtedly possessed, and the cases are, therefore, merely illustrative of the first of the two general principles to which I have already referred.

Now it is clear that in the case of Shukrullah v. Rahmat Bibi this Court had jurisdiction to dispose of the subject-matter of that appeal, which was whether the stay order made by the Civil Judge of Gorakhpur in suit No. 8 was a proper one. On the 8th November, 1940, when the appeal came on for hearing the period of stay allowed by the lower court—which as I have said was for one month—had expired; there had, therefore, ceased to be any question for determination in the appeal which would inevitably have had to be dismissed. It appears to me that what this Court did when it directed that effect be given to those provisions of the compromise between the parties which involved the reference of the amount in dispute in Suit No. 8 to an arbitrator, was to entertain an application for a reference to arbitration of the matter in dispute in that suit. This was not a matter which arose, or, in the circumstances, could arise, in the appeal. It was an extraneous application which in my opinion this Court had no jurisdiction to entertain. In my judgment, therefore, so much of the decree of this Court dated the 8th November, 1940, in the case of Khuda Bux v. Rahmat Bibi as relates to the appointment of an arbitrator to determine the amount due to the plaintiffs in Suit No. 8 was made without jurisdiction and is not binding on us now.

One further submission made on behalf of the respondents must be mentioned. Mr. Shambhu Prasad argued that even if this Court had no jurisdiction to refer the matter in dispute in Suit No. 8 to arbitration, this fact will not affect the validity of the award as the latter can then be, treated as an award made by an arbitrator in an arbitration without, the intervention of a court pursuant to the earlier agreement, made between the parties to refer all matters in dispute to arbitration. I do not think that this contention can be sustained. The arbitrator was appointed by this Court as the result of an agreement reached between the parties after the suit had been filed and embodied in the compromise petition; and it is clear, I think, from the final paragraph of that petition—and no alternative inference has been suggested—that it was the intention of the parties that the award of the arbitrator should become the decree by which Suit No. 8 of 1940 should be concluded. In my opinion, therefore, the award was one made in the course of an arbitration in a suit.

Taking this view of the matter it becomes unnecessary to answer the other questions of law raised in this appeal, but I concur in the conclusions at which my brother has arrived. In particular it appears to me clear that in view of the explicit terms of sub-section (4) of section 31 of the Arbitration Act no court other than this Court (assuming it to have been competent to make the reference) had any jurisdiction thereafter over the arbitration proceedings, and that in consequence the decree of the Civil Judge of Gorakhpur based on the award was invalid. It is also clear, I think, that no order of this Court could confer upon the court of the Civil Judge a jurisdiction which the Arbitration Act says it shall not exercise.

For these reasons I am of opinion that this appeal must be allowed. The decree of the lower court will be set aside and the suit remanded to that court for disposal in the course of law. The appellants are entitled to their costs.

Mathur, J.:— This is a plaintiffs' appeal under section 39 of the Arbitration Act directed against an order of the Civil Judge of Gorakhpur, dated the 22nd of January, 1942, by which he refused to set aside an award made on a reference through the intervention of the court. Briefly stated the facts of the case are:

There is a sugar factory situated in Bhatni, district Gorakhpur, in which the plaintiffs appellants, defendants respondents and three others hold various shares. On the 12th of December, 1938, the plaintiffs along with three others who are not parties to the suit executed a lease in favour of the respondents relating to their share in the factory for a period commencing from the date of the lease up to the 31st of October, 1939. The relevant terms of the lease were that the income from the sugar factory for one season will be taken to be Rs. 75,000 and on that basis the respondents were to pay to the plaintiffs a sum of Rs. 45,221-5-8 in four instalments; that if the profits from the working of the factory in one season exceeded Rs. 75,000 the plaintiffs would be entitled to recover half the profits that may accrue over and above Rs. 75,000 and that the accounts were to be rendered by the defendants to the plaintiffs by the 31st of July, 1940.

After expiry of the term of the lease, a suit No. 8 of 1940 was filed by the plaintiffs against the defendants respondents on the 18th of March, 1940, on the allegations that only three instalments were paid and the last instalment which amounted to Rs. 11,305-5-5 was still due and that profits during that particular period exceeded the amount of Rs. 75,000 by a sum of Rs. 1,50,000 out of which the plaintiffs were entitled to half the amount that is Rs. 75,000. In the written statement filed by the defendants the terms of the lease mentioned in the plaint were admitted, but it was averred that the fourth instalment was already paid up, and that the amount of profits that accrued amounted only to Rs. 1,12,211 out of which a part of the excess profits were already paid up by adjustments. The defendants however admitted that a sum of Rs. 11,511-9-9 was still due from them.

Subsequently the defendants made an application that there was an existing agreement between the parties that all disputes relating to the factory should be referred to arbitration, and on that ground it was prayed that the suit be stayed. This application was actually made under schedule II, paragraph 18 of the Code of Civil Procedure, but as the Arbitration Act came into force in the same year the application was treated as one under section 34 of the said Act.

On the 20th of July, 1940, the Court accepting the allegation of the defendants stayed the suit. The plaintiffs then filed an appeal in this Court against the order of the Civil Judge staying the suit and the appeal was numbered as First Appeal From Order No. 168 of 1940. It is necessary at this stage to point out that there were two other suits between the same parties pending in the court of the Civil Judge of Gorakhpur, one for the dissolution of partnership, and the other for partition of the factory. They were suits No. 28 and No. 35 of 1939 and in these suits as well an application was made to stay the suits under schedule II, paragraph 18 of the Code of Civil Procedure and the suits were accordingly stayed. Two appeals were filed against these orders and they were numbered as First Appeal From Order No. 150 and First Appeal From Order No. 151 of 1940. In these later suits an application was made for appointment of a receiver and by an order of this Court Mr. Misri Lal Chaturvedi was appointed a receiver.

On the 8th of November, 1940, all the three appeals, namely Nos. 150, 151, and 168 of 1940 came up for hearing. The parties filed an application in appeal No. 150 of 1940 alleging that a compromise was arrived at between the parties by which they had agreed that. Mr. Misri Lal Chaturvedi be appointed sole arbitrator with power to decide the matters in controversy between the parties in regard to account and repairs and condition of machinery in such manner as he thinks proper. With regard to suit No. 8 of 1940, it was laid down in this application that Mr. Chaturvedi shall ascertain and determine the amount due to the plaintiffs in that suit. According to this compromise other suits Nos. 28 and 35 of 1939 were to be withdrawn, and suit No. 8 of 1940 was to be disposed of in terms of the compromise. On the same date an order was passed by a Bench of this Court appointing Mr. Misri Lal Chaturvedi as an arbitrator and ordering that he should determine the amount due to the plaintiffs in suit No. 8 of 1940 within one month from that date. It was stated in this order that as an appeal arising out of Suit No. 8 of 1940 was before the Bench, the Bench had jurisdiction to sanction the appointment of Mr. Chaturvedi as an arbitrator in that suit. It may be mentioned here that no issues were settled in suit No. 8 of 1940, and neither the application nor the order mentioned the matters which were specifically referred to the arbitration of Mr. Misri Lal Chaturvedi. On the 17th of January, 1941, Mr. Misri Lal Chaturvedi submitted an award to this Court. This Court however sent down the award to the Civil Judge of Gorakhpur for disposal according to law. Objections were filed to this award on behalf of the plaintiffs which were heard and dismissed by the Civil Judge on the 22nd of January, 1944, who refused to set aside the award. It is against this order that the present appeal has been preferred.

The main points argued by appellants' counsel in this appeal are:

(1) that this Court being an appellate court, was not authorised to refer the matter to arbitration;

(2) that even if an appellate court could refer the matter to arbitration, in the present case the reference was incompetent as the Court was not seized of the entire case;

(3) that there was no proper application in appeal No. 168 of 1940 for reference of the case to arbitrators? and that the only prayer in the said application was that the suit No. 8 of 1940 be disposed of in terms of the compromise;

(4) that if this Court had made the reference, this Court and this Court alone could hear the objections and pass a decree on the award;

(5) that under the circumstances, the Civil Judge was incompetent to hear the objections and to dispose them of, and his judgment and the subsequent decree passed was illegal; and

(6) that the arbitrator had misconducted himself with regard to the proceedings in the making of award.

On behalf of the respondents it is urged that after a decree had been passed on an award, the validity of reference cannot be challenged and it cannot be made a ground for setting aside the award. It is also contended that this Court having held that it had jurisdiction to refer the matter to arbitration that would operate as res judicata and cannot be reagitated. I would first deal with these two objections of the respondents. In the Full Bench case of Mariam v. Amma, it was held by a majority that an objection to the validity of the reference to arbitration, on the ground that the reference was illegal, came within the purview of paragraph 15, schedule II of the Code of Civil Procedure and would be a good ground for setting aside an award. Sir Iqbal Ahmad, dissented from this view. This had, however settled the point so far as this Court was concerned. But in the year 1946 a judgment was delivered by the Privy Council in the case of Chhabba Lal v. Kallu Lal, in which their Lordships remarked that they agreed with the view of Sir Iqbal Ahmad. Their Lordships however went on to “say in their opinion all the powers conferred upon the Court in relation to an award on a reference made in a suit presuppose a valid reference on which an award has been made which may be open to question. If there is no valid reference, the purported award is a nullity, and can be challenged in any appropriate proceeding.” It has been argued on behalf of the respondents that this Privy Council case has overruled the majority decision of the Full Bench and it is no longer open to any party to contest an award on the ground that the reference to arbitration itself was invalid. I am however, unable to accept this view of the matter. The Privy Council has no doubt held that paragraph 15, schedule II of the Code of Civil Procedure which now corresponds to section 30 of the Arbitration Act did not apply in such a case, but they have gone still further and have held that if there was no valid reference the award would itself be a nullity. Thus this question can be raised in any proceeding apart from the provisions of section 30 of the Arbitration Act. I hold therefore that the plaintiffs are certainly entitled to show that the reference itself was invalid, and if they succeed in that, that would certainly result in nullifying the award. On the second point, reliance has been placed on two Privy Council decisions, one reported in Ram Kirpal v. Rup Kuari and the other reported in G.H Hook v. The Administrator-General of Bengal in order to show that even where an order is not by itself res judicata as in the case of execution proceedings, it will certainly have the force of res judicata, if previously passed in the same case. It seems however clear to me that in order to claim the force of res judicata it must be shown that the point was in issue and was heard and decided. In the two cases noted above, the matter was in issue between the parties and a decision was given thereon. In the case before us, both the parties presented an application to this Court on the assumption that this Court was competent to make a reference. There was thus no dispute about this matter between the parties and the remark of this Court that it had jurisdiction in these circumstances would not have the force of res judicata.

Coming now to the objections raised on behalf of the plaintiffs appellants, it is a matter of some little difficulty as to whether the appellate court has any power to refer a matter to arbitration. Section 21 of the Arbitration Act only authorises parties to a suit to make an application for reference to arbitration provided certain conditions are fulfilled. It does not confer any power on the Court itself. After such an application has been made, section 23 says that the Court shall by an order refer to the arbitrator the matter in difference which he is required to determine. At one time when this law of arbitration figured as schedule II of the Code of Civil Procedure, it was held in some cases that under section 107 of the Code of Civil Procedure the appellate court had the same powers as the court of original jurisdiction and therefore could refer the matter to arbitration. Now that a separate Arbitration Act has been passed, section 107 of the Code of Civil Procedure would not be applicable and those rulings would not be of any help. As such, it appeals to me that the appellate court has no power to refer a matter to arbitration. If I may point out with respect, even section 107 would not be helpful because it refers to the powers of the appellate court and nor to right of the parties. Under section 21 only parties to the suit are competent to apply for a reference to arbitration and as parties to an appeal are not so authorised, the appellate court would not be able to act under section 23. In this view of the matter this Court was not competent to make a reference to arbitration.

(2) It is clear from the record that, the appeal No. 165 of 1940, which was pending in (his Court was against the order of the. Civil Judge staying the suit under section 34 of the Arbitration Act. The Court was therefore not seized of the entire case and was, in my opinion, not competent to refer the matters in dispute in the case itself to arbitration. By way of analogy, I may refer to the case of Nand Ram v. Fakir Chand, in which it was held that a court to which issues had been remitted by the appellate court has only jurisdiction to try the issues remitted, and is functus officio in other respects, and cannot make a reference of the case to arbitration. The only point in issue in appeal was whether the suit was properly stayed and for that purpose alone the case was before this Court. I am thus of opinion that on that ground also the Court was not competent to make the reference.

(3) I think there is substance in this point as well. Section 21 of the Arbitration Act lays down that the matters in difference between the parties can only be referred to arbitration. In schedule II, para. 1 of the Code of Civil Procedure it was further laid down that the application shall be in writing and shall state the matters sought to be referred. This has now been omitted in section 21, but it seems necessary that the points on which arbitration is sought should be clearly set out and that a vague reference would always lead to difficulties. It has been pointed out, and I think correctly, that in the application of the 8th of November, 1940, there was no prayer that the suit be referred to the arbitration of Mr. Misri Lal Chaturvedi. Clause (5) was that the arbitrator shall ascertain and determine the amount due to the plaintiffs in suit No. 8 of 1940 of the court of the Civil Judge of Gorakhpur with regard to their claim in that suit, and the only prayer was that suit No. 8 of 1940 shall be disposed of in terms of this compromise. In these circumstances, I think that this Court granted what was not prayed for by making a reference of the case to Mr. Misri Lal Chaturvedi.

(4) and (5) To my mind the proposition appears to be unexceptionable that the court which makes a reference and to which an award is submitted is alone authorised to hear the objections on the award and to pass a decree in terms of the award. This Court could not delegate that power to the Civil Judge of Gorakhpur and on that, account also all the proceedings before the Civil Judge would be ultra vires and his order refusing to set aside the award shall have to be vacated.

(6) It is not necessary to express any opinion on this point as the points already discussed are sufficient to dispose of the case.

I feel certain that the award could not be maintained and ought to have been set aside. The order of the learned Civil Judge refusing to set aside the award should therefore be set aside. The decree which he passed in accordance with the award will consequently be vacated and the case will be sent back to the lower court for disposal according to law. The plaintiff-appellants shall get their costs from the respondents.

BY THE COURT: This appeal is allowed with costs. The decree of the lower court is set aside and the suit is reins need to that court for disposal in due course of law.