Seth Dooly Chand v. Mamuji Musaji And Ors.

1. In this case the action was brought by the plaintiff against certain persons who were the members of a partnership, one of whom were called Yusnff Musaji, for recovering certain moneys. Yusuff Musaji did not appear in the suit. During the course of the proceedings an order was made on the 19th of March 1915,

"that all matters in difference between the parties in this suit including the question of costs thereof be referred to the final decision of Tribhuban Hira Chand of No. 9, Amratolla Street, in the town of Calcutta, who is to make his award in writing and submit the same to this Court together with all proceedings, depositions and exhibits in this suit within three months."

2. This order was made by the consent of the defendants with the exception of two, whose consent had not been obtained, and one of these two defendants was Yusuff Musaji Saleji. In pursuance of that order the arbitrator entered upon the arbitration and made his award, which was filed on the 22nd of December 1915. In that award he found and awarded that the plaintiff was entitled to a decree against the defendants for the sum of Rs. 6,900. It is to be noticed that in making his award, he awarded not only against those defendants who bad consented to the order of reference being made, but also against the two defendants, one of whom was Yusuff Musaji, who had not consented to the order of reference. Yusuff made an application on the 12th of January 1916 to the learned Judge sitting on the original side, asking that the award should be set aside: and, the learned Judge after hearing the parties came to the conclusion that the award should be set aside, and the form of the decree which was drawn up in pursuance of his judgment was that the award should be taken off the file and that it should be set aside. The basis of the learned Judge's judgment was that inasmuch as this was an arbitration undertaken under the order of the Court, that order being made under the provisions contained in the Second Schedule of the Civil Procedure Code, it could not be a valid reference, unless all the parties interested had agreed to it. Now, two main grounds have been argued before us. The learned Counsel for the appellant has argued, first, that even if all the parties interested in the matter. had not consented to the order, that did not make the reference invalid or illegal as regards those defendants who had consented to the reference. This is the first point I intend to deal with in my judgment.

3. Now, the words of the clause (Clause 1 of Section 1) in the Second Schedule are as follows:

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

In my judgment that clause means this---Before the Court can have jurisdiction to make an order of reference under that clause, all the parties interested must agree: and if all the parties interested do not agree, then the Court has no jurisdiction to make the order of reference and the order of reference is invalid not only against those who have not agreed but also against those who have agreed. Then the question arises whether the applicant in this case, Yusuff, was a party who was interested. As I have already said, it was an action brought against Yusuff and other defendants, who were members of this partnership. I do not think I am wronging the learned Counsel for the appellant when I say that he really did not attempt to argue that Yusuff was not an interested party. Yusuff obviously was one who was a defendant in the action and who was alleged to be a member of the firm: and, the fact that the arbitrator had included him in the award as one of the persons who was to pay the sum of Rs. 6,900 to the plaintiff is pretty cogent evidence that Yusuff was a party interested in the subject-matter of the dispute. Therefore, it is clear that all the parties interested within the meaning of this clause did not agree, and, therefore, the Court had no jurisdiction to make the order of reference under that clause. Therefore, the reference was invalid.

4. We have had our attention drawn to two cases: Parsidh Narain Singh v. Ghanshyam Narain Singh 9 C. W. N. 873. and Lal Mohan Pal v. Surya Kumar Das 11 C. W. N 1152 and I agree with the learned Counsel that those decisions are inconsistent: and, if it is necessary for me to express an opinion, I think that the decision which was arrived at in the earlier case, namely, Parsidh Narain Singh v. Ghanshyam Narain Singh (3) was a correct decision, and the later one was an incorrect decision. It is possible that the decision in the later case may have been based upon more than one ground, but certainly one of the grounds was inconsistent with the judgment in the case of Parsidh Narain Singh v. Ghanshyam Narain Singh (3). In point of principle, and having regard to the words of the clause, as I have already said, I have no doubt whatever that the conclusion we ought to come to is that inasmuch as all the parties did not agree, the Court had no jurisdiction to make the order of reference. But that does not conclude the matter, because the learned Counsel for the appellant with great ingenuity has argued that even if the order referring the matter was invalid, still the judgment of the learned Judge, in so far as it directed that the award should be set aside, was not a correct judgment, and that his judgment ought to be limited merely to the direction that the award should be taken off the file: and, his argument was based upon this consideration. He said that assuming for the sake of argument that the reference under the order made by the Court was invalid, still it may very well be that there was an agreement between the plaintiff and some of the defendants that the matters in dispute between them, at all events those parties who were parties to the petition, should be referred to arbitration, and quite independent of the Civil Procedure Code and the Schedule, that would be a good and valid reference to arbitration, and the parties would be left to enforce the rights which they may have, independently of the provisions of the Civil Procedure Code. That depends upon what the parties did agree to: Having heard the argument of the learned Counsel for the appellant and also for the respondent, I have come to the conclusion on the materials before us, the only agreement which was arrived at between the parties was an agreement that an application should be made to the Court for an order of reference: and, in pursuance of that order of reference, they should go to arbitration in respect of all matters in dispute. There is nothing before us upon which we can infer that there was an agreement to refer which was to be carried out independently of the application to Court. To my mind, the fact that there was an application to the Court based upon the petition to which our attention was drawn was cogent evidence that it was a material and essential part of the agreement that an application to the Court should be made for an order of reference. That being so, the result follows that the only agreement being that an application should be made for an order of reference and thereupon all the questions in dispute should be decided by the gentleman whose name was included in the order of reference, it was a reference under the Act and under the Act alone. As I have said before, by reason of the fact that all the parties did not join in the application or did not agree to it, this was an invalid reference. Therefore, the learned Judge was right in ordering that not only should the award be taken off the file but that it should be set aside.

5. Our attention has been drawn to Section 15 of the Schedule, which is headed "Grounds for setting aside award." In that Section there are mentioned three grounds which I need not refer to, and it was argued that the intention of the Act was that under the Act the award should be set aside upon one of those three grounds only arid that the learned Judge not having one of those grounds proved before him had no jurisdiction to set aside the award, and that his jurisdiction was confined to ordering the award to be taken off the file. The observation I have to make is that Section 15 obviously was intended to apply to the case where there has been a valid reference, and then, there having been a valid reference, if there is corruption or misconduct of the arbitrator or umpire, that is one of the grounds for setting aside the award: or, if either party has been guilty of fraudulent concealment of any matter which he ought to have disclosed or of wilfully misleading or deceiving the arbitrator or umpire, that is another ground forgetting aside the award: or, if the award has been made after the issue of an order by the Court superseding the arbitration, and so on, that is the third ground for setting aside the award. All these grounds show that the Act was con. templating in the first instance a valid reference But as I have said in my judgment, there was no valid reference in this case.

6. For these reasons I think that the learned Judge's judgment was right and this appeal should be dismissed with costs.

Asutosh Mookerjee, J.

7. I agree that the order made by Mr. Justice Fletcher should not be disturbed.

8. The substantial question for determination relates to the validity of an award made on a reference, in contravention of the provisions of paragraph 1 of the Second Schedule of the Civil Procedure Code, 1908. That paragraph is in these terms: Where, in any suit, all the parties interested agree that any matter in difference between them shall be referred to arbitration, they may, at any time before judgment is pronounced, apply to the Court for an order of reference." It is plain that before the jurisdiction of the Court to make an order of reference is invoked, there must be an agreement, between all the parties interested, that the matter in difference between them shall be referred to arbitration. Consequently, where there is no such agreement detween all the parties interested, the Court is not competent to make a valid order of reference. In this case, it is not disputed that two of the defendants were not parties to the agreement. This was apparently overlooked at the time the application was made to the Court: the reference was made and was followed by an award in due course. This award has been set aside in its entirety and not merely as regards the persons who were not parties to the agreement. It has not been seriously disputed that the award has no operation as against the parties who did not consent to the reference: the only substantial contention is that the award, though inoperative under the provisions of the Second Schedule to the Civil Procedure Code, may possibly have vitality independently thereof, and that, consequently, the Court should not have set aside the award in its entirety. In my opinion there is no foundation for this argument.

9. It is plain that if there is no valid agreement to form the basis of a reference in the terms of paragraph 1 of the Second Schedule to the Code, there is no valid award whereon a decree can be based in accordance with paragrah 16. Reference, however, bas been made to paragraph 15 to show that this is not expressly mentioned as one of the grounds on which the Court can be invited to set aside the award. This may be conceded: but paragrah 15 obviously assumes a valid reference to arbitration, and only contemplates cases where the propriety of an award on the basis of such a reference is in question. Where, however, the jurisdiction of the Court is called in question, the Court has jurisdiction to decide that it has acted in contravention of the Statute and consequently without jurisdiction: Rashmoni Dasi v. Ganada Sundari Dasi 26 Ind. Cas. 275 : 20 C. L. J. 213 at p. 217 : 19 C. W. N. 84. The case before us is of that description. I am further of opinion that the intention of the parties to the reference in this case was that there should be a reference to arbitration through the intervention of the Court: they never intended that there should be an arbitration independently of the Court. Consequently there is no substance in the ingenious argument that the award should not have been set aside in its entirety but should only have been taken off the file. This conclusion is obvious upon a plain reading of the provisions of the Statute. The judicial decisions on the matter, however, are in a state of considerable confusion: and reliance has been placed on behalf of the appellant upon the case of Lai Mohan Pal v. Surya Kumar Das (4) which, if correctly decided, does assist his argument. This renders necessary a brief review of the authorities relevant to the point.

10. The earliest decisions in this Court, namely, Shitanath Biswas v. Kishen Mohun Mdkerjee 5 W. R. 130; Ram Soondur Mookerjee v. Ram Shurun Mookerjee 6 W. R. 25; Doorga Ghurn Thakoor v. Kally Doss Hazrah 10 W. R. 463. and Bishoka Dasia v. Anunto Lall Pani 4 C. L. R. 65 support the proposition that on the basis of a reference to which all the parties to a litigation have not consented, an award may be made so as to be valid and operative as between the parties to the submission. This view was questioned, and, in my opinion, was correctly questioned in Joy Prokash Lall v. Sheo Golam Singh 11 C. 37 : 5 Ind. Dec. (N. S.) 782. though the Court confirmed the award in that case notwithstanding that some of the parties to the suit did not join in the reference. Later on, in the case of Parsidh Narain Singh v. Ghanshyam Narain Singh (3) this Court, without reference to the earlier decisions, came to the conclusion that an award based on a reference made under such circumstances was invalid in its entirety. The question was next raised in the case of Chairman of the Purnea Municipality v. Sira Sankar Ram 33 C. 399. but was left open for consideration. Subsequently, in Lal Mohan Pal v. Surya Kumar Das (4) the Court took a contrary view, although one member of the Bench was a party to the decision in Parsidh Narain Singh v. Ghanshyam Narain Singh (3). In my opinion, the view taken by this Court in the case of Parsidh Narain Singh v. Ghanshyam Narain Singh (3) is correct and is supported by the decision of the Judicial Committee in Ghulam Khan v. Muhammad Hassan 29 C. 167 : 6 C.W.N. 626 : 29 I. A. 51 : 12 M.L.J. 77 : 4 Bom. L. R. 161 : 8 Sar. P.C.J. 154 : 25 P. R. 1902. In that case, Lord Macnaghten analysed the provisions of Chapter XXXVII of the Code of Civil Procedure of 1882, which corresponds substantially with the Second Schedule of the present Code. He explained that the Code deals with arbitration onder three heads: first, submission in pending suits through the intervention of the Court: secondly, submission while no suit is pending, but subsequently brought into Court: and, thirdly, submission and arbitration thereon without the intervention of the Court. As regards the first of these classes of cases, Lord Macnaghten pointed out that the Court makes an order of reference on an agreement which must be the agreement of all the parties to the suit, and fixes a time for the delivery of the award with power to enlarge the time. As regards the second and third classes of cases, Lord Macnaghten proceeded to observe that "there is a fundamental difference between these two classes and the first class which does not teem to have been always kept in view in the Courts in India. In the cases falling under the first head, the agreement to refer, and the application to the Court founded upon it, must have the concurrence of all parties concerned and the actual reference is the order of the Court. So that no question can arise as to the regularity of the proceedings up to that point." This distinction was emphasised in the case of Jadunath Chowdhury v. Kailash Chandra Bhattacharya (13) where an award was upheld, although all the persons interested were not parties to the submission, as the reference had been made without the intervention of the Court. In my opinion, there is no possible room for doubt as to the fundamental nature of the condition imposed by the Legislature in the first paragraph of the Second Schedule to the Code. This accords with the view adopted and applied by the Madras High Court in Indur Subbarami Reddy v. Kandadai Rajamannar Ayyangar 26 M. 47 : 12 M. L. J. 396. and Rangaswami Aiyar v. Swami Aiya 17 M. L. J. 394. In the Allahabad High Court, however, there has been a remarkable absence of unanimity of opinion. As early as 1887, that Court decided, in the case of Deo Nandan v. Bhirgu Rai A.W.N. (:887) 215. that an award made on a reference through the intervention of a Court was invalid if all the parties interested did not join in the submission. This opinion was discarded in the case of Pitam Mal v. Sadiq Ali 24 A. 229 : A. W. N. (1902) 19. and the expression all the parties" was interpreted to mean "all the parties who had indicated their interests in the litigation by their presence in the Court." This view was, however, abandoned shortly afterwards in Kaahu Singh v. Baljit Singh 29 A. 423 : 4 A. L. J. 347 : A. W. N. (1907) 147. But there was a swing of the pendulum the other way in the case of Ishar Das v. Keshab Deo (1). Since then, the Allahabad High Court, in Haswa v. Mahbub (2) has adpoted the view taken in Parsidh Narain Singh v. Ghanshyam Narain Singh 2 Ind. Cas. 414 : 10 C. L. J. 41 : 14 C. W. N. 75 : 37 C. 63. arid the latest decision in Sabta I rasad v. Dharam Kirtisaran 18 Ind. Cas. 609 : 35 A. 107 : 11 A. L. J. 66. points to the same conclusion.

11. In this diversity of judicial opinion, I do not feel pressed by the cases which support the view contrary to what I take and I prefer to interpret the clear provisions of the Statute and to give effect to them. On such interpretation, there can be no doubt that the award in this case was inoperative because based on a reference not contemplated by the Code, and has been rightly set aside. The true view is that this is a case not of an improper award but of an invalid reference to arbitration. The entire foundation of the jurisdiction of the Court is removed, as soon as it is established that the parties have failed to comply with the fundamental requirement of the Statute embodied in the first paragraph of the Second Schedule of the Civil Procedure Code.

12. On this ground I agree that the order of Mr. Justice Fletcher should be affirmed and this appeal dismissed with costs.