Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
Judges
Acts
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
Judges
Acts
Smart Summary

Structured Summary of the Opinion (Collister and Bajpai, JJ.)

Factual and Procedural Background

One Seth Ram Copal instituted Suit No. 149 of 1921 against Rai Bahadur Seth Mewa Ram seeking dissolution of partnership and partition of partnership assets, alleging partnership in ginning factories at Saharanpur and Chandausi. The trial court decreed the suit on 10 August 1922 and appointed a receiver to sell the factories and goods by 30 September 1922. On 23 August 1922 the parties made a private arrangement: the plaintiff would take possession of the Chandausi factory and the defendant Mewa Ram would remain in possession of the Saharanpur factory. Mewa Ram appealed (First Appeal No. 366 of 1922); Mewa Ram died while the appeal was pending and his adopted son Shanti Lal was brought on record. On 31 May 1926 the High Court decreed the appeal and dismissed the suit.

On 11 November 1926 Shanti Lal applied to the Additional Civil Judge of Moradabad under section 144 of the Civil Procedure Code for restitution. Seth Ram Gopal (also referred to earlier as a party in the suit history) objected on 15 January 1927. The lower court disposed of the matter on 17 October 1927 against Shanti Lal. Shanti Lal appealed to the High Court, which on 21 December 1931 remanded the case under Order XLI, Rule 23, holding that the applicant was entitled to restitution by possession of the old factory and to profits, if any, for the period of management by the plaintiff; the High Court held the lower court had not decided profits and remanded for determination on the merits.

After the High Court decision, Ram Gopal became a lunatic; his wife sought guardianship on 20 May 1932 but Ram Gopal's maternal uncle Rai Saheb Behari Lal was appointed guardian. The matter was later referred to arbitration. An award dated 26 April 1933 by arbitrator Seth Champa Lal was adverse to Seth Ram Gopal. Objections were filed and on 19 January 1935 the lower court held the objections had no force and passed a decree in terms of the award. Seth Ram Gopal filed the present appeal against that decree. The appellate court (this opinion) addresses preliminary objections to the appeal and ultimately converts the appeal into a revision application, hears substantive challenges to the reference to arbitration and the conduct surrounding it, allows the revision, and sets aside the decree of 19 January 1935.

Legal Issues Presented

  1. Whether an appeal lies against a decree passed by a court in accordance with an arbitrator's award under paragraphs 15–16 of the Second Schedule to the Civil Procedure Code, or whether such a decree is not appealable except on limited grounds.
  2. Whether proceedings under section 144 of the Civil Procedure Code (application for restitution) are "suits" within the meaning of the Second Schedule, and therefore whether such proceedings can be referred to arbitration under the Second Schedule.
  3. Whether, even assuming section 144 proceedings can be referred to arbitration, the trial court acted legally and without material irregularity in permitting reference to arbitration where one party was a lunatic and where the proposed arbitrator had an apparent interest and relationship to one of the parties.

Arguments of the Parties

Appellant's Arguments (Seth Ram Gopal)

  • The Second Schedule to the Civil Procedure Code is inapplicable to the present proceedings, so the bar on appeals contained in paragraph 16 of the Second Schedule does not arise.
  • Proceedings under section 144 are not "suits" and therefore could not be validly referred to arbitration under the Second Schedule.
  • Section 141 of the Code (making procedural provisions for suits applicable as far as possible to other proceedings) does not make the Second Schedule applicable to section 144 proceedings.
  • Even if reference to arbitration were permissible, the trial court acted illegally and with material irregularity in allowing the reference because Ram Gopal had been adjudged a lunatic, a guardian had been appointed, leave of court specifically recorded was required, and the proposed arbitrator (Seth Champa Lal) had an interest and relation to the opposing party.

Respondent's Arguments (Shanti Lal / opposite party)

  • A preliminary objection was raised that no appeal lies against the decree passed by the court below in accordance with the award, relying on paragraphs 15 and 16 of the Second Schedule and authorities to the effect that a decree in accordance with an award is not appealable except on limited grounds (e.g., where the decree is in excess of or not in accordance with the award).
  • The respondent relied on authorities (Full Bench decisions cited) holding that once objections to an award are overruled and the court pronounces judgment following the award, an appeal is generally incompetent, though revision may be possible in limited circumstances.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Lutawan v. Lachya Full Bench held that where an objection to an award is not raised in time or is rejected and the court proceeds to pronounce judgment and frame a decree, no appeal lies except on grounds in article 16 of the Second Schedule. Used to support the preliminary objection that an appeal would be incompetent if the decree simply follows the award.
Mariam Bibi v. Amna Bibi Though it affected earlier authority, it was held that a decision overruling an objection to the award and passing a decree in accordance with the award cannot be challenged by appeal; revision is possible if the court assumed jurisdiction where it had none or acted illegally/materially irregularly. Supported the proposition that the remedy may be in revision rather than appeal where the court acted illegally or without jurisdiction; the present appeal was converted into a revision application on this basis.
T. Wang v. Sona Wangdi Held Second Schedule not applicable to execution proceedings because execution proceedings are not suits but arise after decision of a suit. Cited by the court to illustrate that certain proceedings (execution) are not "suits" for purposes of the Second Schedule; used in analogical discussion whether restitution proceedings are "suits".
Bachan Lal v. Amar Singh (Bennet, J.) Held an execution proceeding is not a suit and therefore Schedule II does not entitle parties in execution to a reference to arbitration; arbitration proceedings in such context are invalid. Relied upon to reinforce the view that not all post-judgment proceedings attract Schedule II; used in assessing whether section 144 proceedings are within Schedule II.
Parmeshwar Singh v. Sitaldin Dube Held that an application for restitution is not an application in execution; restitution proceedings arise as a result of a suit and are not the institution of a suit. Used to support the court's conclusion that restitution proceedings are distinct from suits instituted by plaint and thus not automatically within the Second Schedule.
Pita Ram v. Jujhar Singh Instances where a wide meaning was assigned to the word "suit" (in insolvency context). Cited as authority granting a broad interpretation of "suit" in specific contexts; the court noted these authorities but declined to extend the meaning of "suit" in the Second Schedule beyond what section 26 and section 144 suggest.
Provas Chandra Sinha v. Ashutosh Mukherji In Calcutta, the word "suit" in a Letters Patent clause was interpreted as meaning proceedings initiated on an originating summons. Cited as an example of broad interpretation elsewhere; the court nonetheless refused to apply such breadth to the definition of "suit" in the Second Schedule for section 144 matters.
Hansraj Gupta v. Official Liquidators of Dehra Dun etc. Company (Privy Council) Stated that "suit" ordinarily means a civil proceeding instituted by the presentation of a plaint. Used to support the narrower, ordinary meaning of "suit" in interpreting the Second Schedule vis-à-vis section 144 proceedings.
Basaratulla Mia v. Reajuddin Mia (Page, J.) Discussed in connection with section 141; part of broader analysis of the scope of section 141 and its predecessors. Quotations and reasoning from this line of authority were used in the court's examination of whether section 141 makes Schedule II applicable to section 144 proceedings; court concluded section 141 did not help the opposite party.
Thakur Prasad v. Fakir-ullah (Judicial Committee) Decided that section 141 does not apply to applications for execution but only to "original matters in the nature of suits" such as probate, guardianship, etc.; "so forth" to be read ejusdem generis. Relied on (through subsequent discussion) to support the view that section 141 does not extend Schedule II to section 144 restitution proceedings.
Sarat Chandra Hose v. Bisweswar Mitra (Mukerji, J.) Quoted for analysis of section 141 and for reading Thakur Prasad as limiting section 141 to original matters ejusdem generis with probate, guardianship. Used to reinforce the court's conclusion that section 141 does not make Schedule II applicable to restitution proceedings under section 144.
Manohar Lal v. Jadunath Singh (Lord Magnaghten) Stated there ought to be evidence that the attention of the court was directly called to the fact that a minor was a party to the compromise and that leave of the court was obtained and shown in an unambiguous way. Invoked to support the principle that where a party is under disability (minor or lunatic), the court must have explicit, recorded evidence that leave to compromise or refer was obtained and that the court exercised judicial discretion.
Kalavati v. Chedi Lal Held that the court should record that an application was made, that terms of the proposed agreement were considered by the court, and that the court granted leave having regard to the minor's interests. Used to show the procedural safeguards required when compromising or referring disputes involving minors or lunatics; the court found such safeguards absent in the present case.

Court's Reasoning and Analysis

The court proceeded in the following analytical steps, as set out in the opinion:

  1. Preliminary objection on appealability: The respondent argued that no appeal lies against a decree passed in accordance with an arbitrator's award under paragraphs 15–16 of the Second Schedule. The court acknowledged authorities (Lutawan v. Lachya; Mariam Bibi v. Amna Bibi) supporting the proposition that such decrees are not generally appealable except on limited grounds. The appellant contended the Second Schedule was inapplicable; however, the court (for present purposes and at respondent's instance) assumed the schedule applied and that an appeal did not lie.
  2. Conversion to revision: Because of the bar on appeal assumed for present purposes, the court converted the proceedings into an application in revision, noting there was no issue of limitation, court fees, or prejudice to the respondent by such conversion. The court indicated that revision is competent where the lower court assumed jurisdiction where it had none or acted illegally or with material irregularity.
  3. Whether section 144 proceedings are "suits" and thus referable to arbitration under the Second Schedule: The court examined the statutory language. Section 144 proceedings are initiated by application and section 144(2) states no suit shall be instituted for restitution; section 26 defines suits as instituted by presentation of a plaint. Section 89 references arbitration "in a suit or otherwise" but the court concluded authorities show restitution proceedings are not the same as execution proceedings and are not instituted by plaint. Relying on Parmeshwar Singh and other authorities, the court concluded restitution proceedings are taken as arising from a suit but are not themselves the institution of a suit; therefore the court held Schedule II does not apply to restitution proceedings under section 144 and the lower court had no jurisdiction to refer the matter to arbitration.
  4. Even if referable, whether the lower court committed illegality/material irregularity in granting reference: The court considered the fact that Ram Gopal had been adjudged a lunatic and a guardian had been appointed. Order XXXII, Rules 7 and 15 require that for compromises or agreements involving persons of unsound mind there must be recorded leave of the court. The court explained that where one party is under disability (minor or lunatic), the court must have materials before it and exercise judicial discretion in the interests of the ward. The court reviewed the record: an initial application for reference was rejected on 13 February 1933; on 18 February Shanti Lal expressed agreement; on 23 February an application on behalf of the mukhtar khas of the guardian stated the reference was beneficial to Ram Gopal and the court wrote the word "allowed" on the application. The court found that the lower court did not exercise judicial discretion or obtain adequate materials and that it acted as a matter of routine.
  5. Conflict of interest and relationship of arbitrator: The court noted that Seth Champa Lal (the arbitrator) was a creditor of Shanti Lal to the extent of about a lakh, and was the natural father of Shanti Lal; these facts meant the arbitrator was interested in the subject-matter and related to one of the parties. The court considered that these facts were known to Shanti Lal and should have been brought to the court's notice when Shanti Lal revived the application for reference. The court stated that had it been asked to grant leave in such circumstances (a lunatic party and an arbitrator who was the natural father and interested creditor of the opposite party), it would not have granted leave.
  6. Conclusion of illegality/material irregularity: For these reasons (lack of proper recorded judicial exercise of discretion, the disability of one party, and the arbitrator's interest/relationship), the court concluded the lower court acted illegally and with material irregularity in referring the matter to arbitration.
  7. Scope of revisional review: The court noted other points were urged (that the award decided extraneous matters or that the guardian was negligent), but the court considered those not appropriate for attention in revisional jurisdiction and confined itself to the jurisdictional and procedural defects already described.

Holding and Implications

Holding: The court allowed the application in revision, set aside the decree of the court below dated 19 January 1935, revoked the order of reference to arbitration, and remitted the case to the trial court with directions to dispose of the application under section 144 of the Civil Procedure Code made by Shanti Lal after giving notice to the guardian of Seth Ram Gopal to file objections as he may be advised. Parties were ordered to bear their own costs both in the court below and in this Court.

Implications:

  • The direct effect on the parties is the vacation of the decree based on the arbitral award and the revocation of the reference to arbitration; the trial court must reconsider and dispose of the section 144 application with proper notice to the guardian and after appropriate proceedings.
  • The court emphasized procedural safeguards when compromising or referring matters to arbitration involving persons under disability (minors or lunatics): the court must have expressly recorded leave and must exercise judicial discretion on adequate materials; absence of such recorded judicial consideration can render a reference illegal and vitiate resulting decrees.
  • The opinion does not announce that it is establishing a new general precedent beyond applying established principles regarding non-appealability of decrees in terms of awards (subject to revision in cases of illegality/material irregularity) and procedural protections for wards of the court; the immediate consequence is the remand and fresh disposal of the section 144 application in the trial court. No broader novel rule of law was declared beyond the reasoning set out above.

    Ram Gopal v. Shanti Lal

    Collister and Bajpai, JJ.:— The facts which have given rise to this appeal may be stated. One Seth Ram Copal instituted suit No. 149 of 1921 against Rai Bahadur Seth Mewa Ram for dissolution of partnership and partition of partnership assets on the allegation that he was a partner with the defendant in the ginning factories situate at Saharanpur and Chandausi. There were certain other suits more or less connected with suit No. 149 of 1921, but it is not necessary to give the details of those suits. The suit under consideration, namely suit No. 149 of 1921, was decreed by the trial court on the 10th of August, 1922, and a receiver was appointed to sell the factories and goods by the 30th of September, 1922. On the 23rd of August, 1922, the parties came to an arrangement which was to the effect that the plaintiff should be put in possession of the Chandausi factory and Mewa Ram defendant should continue in possession of the Saharanpur factory. An appeal (First Appeal No. 366 of 1922) was had by Mewa Ram against the decision of the trial court, but the private arrangement at which the parties arrived on the 23rd of August, 1922, continued during the pendency of the appeal. Mewa Ram died while the appeal was pending in this Court and his adopted son Shanti Lal was brought on the record as his legal representative. On the 31st of May, 1926, the High Court decreed the appeal of Mewa Ram and dismissed the suit.

    On the 11th of November, 1926, Shanti Lal made an application in the court of the Additional Civil Judge of Moradabad under section 144 of the Civil Procedure Code for restitution. On the 15th of January, 1927, Seth Ram Gopal filed objections to Shanti Lal's application. On the 17th of October, 1927, the objections of Seth Ram Gopal and the application of Shanti Lal were disposed of. The result of the adjudication was against Shanti Lal and he, therefore, preferred an appeal to the High Court. On the 21st of December, 1931, the High Court remanded the case, holding that, the applicant was entitled to restitution by possession of the old factory in addition to the other reliefs already decreed. He was also held to be entitled to profits, if any, accruing from the factory during the period of management by the plaintiff. The Court further held that the lower court had not given a decision as to the amount of the profits. The case was therefore remanded under order XLI, rule 23 of the Civil Procedure Code for disposal of the questions arising between the parties on the merits.

    Some time after the decision of the High Court, Ram Gopal became a lunatic, and on the 20th of May, 1932, the wife of Ram Gopal applied to be appointed the guardian of her husband during the pendency of the proceedings. She, however, was not appointed the guardian of her husband, but Ram Gopal's maternal uncle Rai Saheb Behari Lal was appointed the guardian and he filed his objections to the claim of Shanti Lal on the 3rd of August, 1932.

    After this the matter went to arbitration. We shall have occasion to discuss the circumstances under which the matter was referred to arbitration and in that connection we shall discuss the various applications of the parties, but at the present moment it is enough to say that the matter was referred to arbitration. On the 26th of April, 1933, the arbitrator Seth Champa Lal gave an award which was adverse to Seth Ram Gopal. Objections were filed by Seth Ram Gopal. On the 19th of January 1935, the court below held that the objections had no force and passed a decree in terms of the award.

    It is against this decree that the present appeal has been filed by Seth Ram Gopal. A preliminary objection has been taken on behalf of the respondent that no appeal lies against the decree passed by the court below in accordance with the award. Our attention has been drawn to paragraphs 15 and 16 of the second schedule to the Code of Civil Procedure where it is provided that an award shall be set aside on certain grounds, but if the award is neither remitted or if no application has been made to set aside the award or the court has refused such an application, then the court shall proceed to pronounce judgment according to the award and “upon the judgment so pronounced a decree shall follow, and no appeal shall be from such decree except in so far as the decree is in excess of, or not in accordance with, the award.” There is a plea by the appellant that the second schedule is entirely inapplicable to the facts of the present case. We shall notice this plea later. At the present moment we are assuming that the schedule is applicable and if it is so applicable the preliminary objection has great force. In Lutawan v. Lachya(1) it was held by a Full Bench of this Court as follows: “Where an objection to the validity of an award, which might have been raised under article 15 of the second schedule to the Code of Civil Procedure, is not raised within the time limited, or, being raised, is rejected, and the court proceeds to pronounce judgment and to frame a decree, no appeal will be except on the grounds stated in article 16 of the same schedule.” It is conceded that the decree passed by the court below is neither in excess of, or not in accordance with, the award, and therefore an appeal would be incompetent. Although the authority of this Full Bench in other matters was greatly shaken by the subsequent Full Bench case of Mariam Bibi v. Amna Bibi(2), it was held again that the decision of the court overruling an objection to the award and passing a decree in accordance with the award cannot be challenged by an appeal. It was, however, held in that case that the aggrieved party could bring the matter up in revision if the court had assumed jurisdiction where it had none or had acted illegally or with material irregularity in the exercise of its jurisdiction.

    As we said before, learned counsel for the appellant has argued that the second schedule of the Civil Procedure Code was inapplicable to the present proceedings and therefore the bar to an appeal as contained in paragraph 16 of the second schedule does not arise, but for the purposes of the present, case we shall, without deciding the matter, assume that the preliminary objection is sound and that an appeal does not lie. This assumption is entirely at the instance of the respondent. We can, however, convert the proceedings before us into an application in revision, and, as we are satisfied in the present case that interference of this Court is called for, we have converted this appeal into an application in revision. There is no question of limitation nor any question of court fees, nor can it be said that the respondent is being taken by surprise or is in any way being prejudiced by our action.

    The first question which is then raised by Mr. Pathak on behalf of the applicant is that the proceedings in the court below were under section 144 of the Civil Procedure Code and they could not be referred to arbitration. The arbitration in the present case was through the intervention of the court and is said to be an arbitration in a suit. Paragraph, second schedule, of the Code of Civil Procedure provides: “Where in any suit all the parties interested agree etc. etc.”, and the contention is that proceedings under section 144 do not amount to a suit. The word “suit” has not been defined in the Civil Procedure Code, but section 144, clause (1) provides that the proceedings will be started on the application of a party entitled to any benefit by way of restitution, and clause (2) says that no suit shall be instituted for the purpose of obtaining any restitution. It is clear from the phraseology of section 144 itself that there is a distinction between a suit and an application for restitution. Section 89 of the Civil Procedure Code provides: “…all references to arbitration whether by an order in a suit or otherwise, and all proceedings thereunder, shall be governed by the provisions contained in the second schedule.” Here again there is reference to a suit. Section 26 says that “Every suit shall be instituted by the presentation of a plaint or in such other manner as may be prescribed”, and section 144 says that the proceedings shall — be initiated on the application of a party and no suit shall be instituted, or in other words no plaint shall be presented, for the purpose of obtaining restitution.

    It was held in T. Wang v. Sona Wangdi that the second schedule of the Civil Procedure Code is not applicable to execution proceedings because execution proceedings cannot be considered to be suits, but really arise after the decision of a suit, and this view was followed by a learned single Judge of this Court in Bachan Lal v. Amar Singh where Bennet, J., held that “an execution proceeding is not a suit and therefore schedule II does not entitle the parties to an execution proceeding to file an application for a reference to arbitration. The arbitration proceedings are invalid and the court is not entitled to enforce these arbitration proceedings.”

    It is well settled so far as this Court is concerned that restitution proceedings are not in the nature of applications for execution, but at the same time it has not been laid down by this Court or by any other court—and learned counsel for the parties have not been able to cite any authority to the effect—that an application for restitution is the same thing as the presentation of a plaint in a suit. In Parmeshwar Singh v. Sitaldin Dube(3) it has been held that an application for restitution is not an application in execution, but there cannot be the slightest doubt that proceedings by way of restitution are taken as the result of a suit and not by the institution of a suit, nor can they be said to be the continuation of a suit.

    Mr. Panna Lal on behalf of the opposite party has drawn our attention to certain cases where a comprehensive definition has been given to the word “suit”. In Pita Ram v. Jujhar Singh(4) their Lordships were considering certain proceedings in insolvency matters and there they were prepared to assign a very wide meaning to the word “suit”, and in Calcutta in the case of Provas Chandra Sinha v. Ashutosh Mukherji the word “suit” as used in clause 12 of the Letters Patent of the Calcutta High Court was interpreted as meaning any proceeding initiated on an originating summons. We have, however, got to interpret the word “suit” as used in the second schedule, and we find no warrant for extending its meaning beyond the one to be evolved out of section 144 and section 26 of the Civil Procedure Code. In Hansraj Gupta v. Official Liquidators of Dehra Dun etc. Company their Lordships of the Privy Council said: “The word ‘suit’ ordinarily means, and apart from some context must be taken to mean, a civil proceeding instituted by the presentation of a plaint.”

    It was then said on behalf of the opposite party that by reason of section 141 of the Civil Procedure Code the procedure provided in the Code in regard to suits shall be followed as far as it can be made applicable in all proceedings in any court of civil jurisdiction, but it does not follow therefrom that the second schedule of the Civil Procedure Code becomes applicable to proceedings under section 144 by reason of the provisions of section 141 of the Civil Procedure Code. In this connection we cannot do better than quote what was said by Mukerji, J. in the case of Sarat Chandra hose v. Bisweswar Mitra:

    “An elaborate research into the history of section 141 and an exhaustive analysis of the case law bearing on it will be found in the recent judgment of Page, J., in the case of Basaratulla Mia v. Reajuddin Mia. Now amidst the hopelessly conflicting mass of judicial decisions which have clustered round section 141 and section 647 which stood in its place before, the solid bed rock on which it is safe to take one's stand is the decision of the Judicial Committee in the case of Thakur Prasad v. Fakir-ullah. Their Lordships' decision makes it perfectly plain that the section does not apply to applications for execution, but only to ‘original matters in the nature of suits such as proceedings in probates, guardianships and so forth’. The expression ‘so forth’ must, in my opinion,” be read as meaning proceedings ejusdem generis with the instances that precede it, and include such proceedings as in divorce, in insolvency, for succession certificate and the like and the expression ‘original matters’ in my opinion confirms that view as meaning matters which originate in themselves and not those which spring up from a suit or from some other proceedings or arise in connection therewith.”

    section 141 of the Civil Procedure Code, therefore, does not help the opposite party.

    This being our view, schedule II of the Civil Procedure Code does not apply to restitution proceedings and the court below had no jurisdiction to refer the matter to arbitration.

    Even if we were to assume that the court below had jurisdiction and that section 144 proceedings are capable of being referred to arbitration, we think that in this particular matter the trial court acted illegally and with material irregularity in the exercise of its jurisdiction.

    We said before that the dispute between the parties was referred to arbitration and that we shall at a later stage discuss the various applications and the circumstances under which the dispute was referred to arbitration. It is clear that Ram Gopal had become insane in 1932 and a guardian had been appointed. Order XXXII, rule 15, of the Civil Procedure Code says that “the provisions contained in rules 1 to 14, so far as they are applicable, shall extend to persons adjudged to be of unsound mind…” Order XXXII, rule 7 provides: “No next friend or guardian for the suit shall, without the leave of the court, expressly recorded in all proceedings, enter into any agreement or compromise on behalf of a minor with reference to the suit in which he acts as next friend or guardian.” Paragraph I of schedule II says: “Where in any suit all the parties interested agree etc. etc.” The agreement to reference is, therefore, an agreement within the meaning of order XXXII, rule 7 of the Code of Civil Procedure. This has been laid down by the Full Bench case of Mariam Bibi v. Amna Bibi to which we have already referred.

    The position, therefore, is that there must have been the leave of the court expressly recorded in the proceedings before the matter could have been referred to arbitration. Although in the case of persons who are under no such disability as minority or lunacy the leave of the court for a compromise or for an agreement to refer is not necessary because they are expected to protect their interests, such a requirement in the case of minors and lunatics is based on the fact that minors and lunatics are after all wards of the court and it must be clear that the leave of the court was obtained and that it was expressly recorded in the proceedings. As pointed out by Lord Magnaghten in Manohar Lal v. Jadunath Singh “there ought to be evidence that the attention of the court was directly called to the fact that a minor was a party to the compromise; and it ought to be shown on petition, or in some way not open to doubt, that the leave of the court was obtained.” It is also clear that the court should, before granting leave, exercise a judicial discretion as to the propriety of the compromise or the reference to arbitration in the interest of the minor. The court, must have materials before it and nothing should be concealed from the court in a matter like this and the materials must satisfy the mind of the court that the action proposed is for the benefit of the minor or the lunatic.

    It is not possible to lay down any hard and fast rule as to what should be done in a matter like this. In some cases it has been held that there should be an, affidavit of the guardian that the compromise or the reference was for the benefit of the minor: in other cases it has been held that there should be an opinion of the counsel or a statement by the counsel at the bar that the compromise is a proper one and should be sanctioned in the interest of the minor; but there can be no doubt that all facts necessary for the exercise of a judicial discretion by the court should be placed before the court and nothing should be concealed, for where the matter is being referred to arbitration and one of the parties is a lunatic there should be abundant good faith. In Kalavati v. Chedi Lal it was held that “The court should record the, fact that such application was made to it; that the terms of the proposed agreement or compromise were considered by the court; and that, having regard to the interests of the minor, the court granted leave to the making of the agreement or compromise.”

    In the present case we find that on the 6th of February, 1933, an application was filed in court purporting to be one on behalf of Seth Ram Gopal through Babu Murli Manohar Agarwal, Advocate, and in that it was said that Rai Bahadur Seth Champa Lal was the natural father of Lala Shanti Lal, applicant to the suit, and Ram Gopal was willing that the matter in dispute might be referred to him as arbitrator. Narain Singh, special attorney, and Sohan Lal, pairokar on behalf of Ram Gopal, approached the Seth Saheb aforesaid at Beawar alias Naya Nagar and made a request to him and the Seth Saheb had agreed. On the last date of hearing it was submitted on behalf of the applicant that if the Seth Saheb agreed, the matter might be referred to him for arbitration. It was prayed that the matter might be referred to Seth Saheb aforesaid for arbitration. There is no allegation in this application, which seems to be the first application in the matter, regarding any benefit arising to Seth Ram Gopal by a reference to arbitration. The application was presumably shown to counsel for Shanti Lal and a week's time was prayed for for giving a reply. On the 13th of February 1933, the court rejected the application for reference to arbitration because Shanti Lal after taking a week's time had filed no application consenting to refer the case to arbitration and the conclusion, according to the Judge, was clear that he did not want to refer the case. On the 18th of February; 1933, there was an application by Shanti Lal expressing his agreement to the appointment of Seth Champa Lal as an arbitrator, and it is on the 23rd of February, 1933, that an application was presented on behalf of Seth Ram Gopal by his counsel and by his mukhtar khas Narain Singh stating that permission may be granted for the appointment of Seth Champa Lal as arbitrator and stating that the decision of the matter at issue by arbitration was beneficial to Seth Ram Gopal. Then and there the court accepted the prayer by putting down the word “allowed” on the application.

    We notice that on a former occasion the proceedings for reference to arbitration proved in fructuous because of the hesitation of Shanti Lal himself, but they were revived at the instance of Shanti Lal, and when on the 23rd of February, 1933, an application was made on behalf of the mukhtar khas of the guardian of the lunatic, the court should have been alive to the gravity of the situation and should have asked for some more information, on the subject. It has been established beyond any, doubt that Seth Champa Lal is a creditor of Shanti Lal to the extent of a lakh or so. There are documents on the record which show that Mewa Ram, the predecessor of Shanti Lal, had mortgaged the ginning factory at Chandausi to Seth Champa Lal and the arbitrator was, therefore, interested in the subject-matter of dispute between Shanti Lal and Ram Gopal. Whether this fact was known to the pairokars of Ram Gopal or not is a question of minor importance. It was undoubtedly known to Shanti Lal and the fact ought to have been brought to the notice of the court when Shanti Lal revived the application on the 18th of February 1933, for sending the case to arbitration. Seth Champa Lal is the natural father of Shanti Lal, the opposite party before us, and speaking for ourselves we are prepared to say that if an application for reference to arbitration had been made to us in a, matter like this, where the arbitrator was the natural father of one of the parties to the reference and was himself interested in the subject-matter of dispute, we would not have in the case of a lunatic granted leave.

    We are not attaching any very great importance to the fact that leave was granted by writing the single word “allowed” on the application, but we feel that the court below did not exercise a judicial discretion in the matter and gave leave as a matter of routine.

    For the reasons given above we are satisfied that the court below acted illegally and with material irregularity in the exercise of its jurisdiction in referring the matter to arbitration.

    Certain other points were taken by learned counsel for the applicant to show that the award was vitiated by reason of the fact that the arbitrator decided certain extraneous matters or that the minor's guardian was guilty of gross negligence, but we do not think that these are matters on which we can pay any attention in our revisional jurisdiction. On the whole we have come to the conclusion that this application in revision should be allowed. We accordingly allow the same, set aside the decree of the court below dated the 19th of January, 1935, revoke the order of reference to arbitration and send back the case to the trial court with directions to dispose of the application under section 144 of the Code of Civil Procedure made by Shanti Lal, after giving notice to the guardian of Seth Ram Gopal to file such objections as he may be advised to take in the matter. Parties will bear their own costs both in the court below and in this Court.

    Order XXXII, rule 7

    Use AI to get other relevant cases.

    Comments

    Ram Gopal v. Shanti Lal
    (Sep 9, 1941)