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Sheo Narain v. Bala Rao
Case Summary: Appeal by Sheo Narain in Suit No. 21 of 1929 (Subordinate Judge, Jhansi)
Factual and Procedural Background
Ganesh (also referred to as Ganesh Upadhia or Upadhya Ganesh) died leaving considerable property. Two of his sons, Bala Rao and Sheo Narain, disputed their respective shares in that property. Mt. Dulari, a widowed aunt of Ganesh, also claimed a right of maintenance.
The dispute between Bala Rao and Sheo Narain led to police involvement and a complaint recommending that they be bound over under Section 107, Criminal P.C. While proceedings under Section 107 were pending, Bala Rao and Sheo Narain entered into two agreements of reference to arbitration dated 13 September 1928; Mt. Dulari joined one of these agreements.
On 17 October 1928, Sheo Narain sent registered notices to the seven appointed arbitrators purporting to revoke the agreement of reference. On 23 January 1929, Bala Rao applied in the Subordinate Judge's Court under Schedule 2, para. 17, Civil P.C., to have the agreement filed in Court. The arbitrators delivered an award on 6 April 1929. Bala Rao then withdrew his January application and on 27 June 1929 applied under Schedule 2, para. 20, Civil P.C., that the award be filed in Court; this application was registered as Suit No. 21 of 1929.
Notice of the application to file the award was served on Sheo Narain, who contested it by petitions dated 50th July 1929 and 8th August 1929. The learned Subordinate Judge dismissed Sheo Narain's objections, upheld the award and directed decree in terms of the award. Sheo Narain appealed. The appellate court considered three principal points urged on behalf of Sheo Narain and delivered the opinion summarized below.
Legal Issues Presented
- Whether Sheo Narain's registered notices of 17 October 1928 revoked the submission to arbitration and rendered the arbitrators functus officio so that any award made on 6 April 1929 was invalid.
- Whether Bala Rao's application of 23 January 1929 under Schedule 2, para. 17, Civil P.C., to have the agreement of reference filed in Court operated to oust the jurisdiction of the arbitrators.
- Whether the arbitrators, by allotting certain debts en bloc to Sheo Narain and directing him to pay Rs. 7,000 to Bala Rao instead of dividing those debts between the parties, exceeded the scope of the reference and produced a legally invalid award.
Arguments of the Parties
Appellant's (Sheo Narain) Arguments
- That he revoked the agreement of reference by registered notices dated 17 October 1928, and consequently the arbitrators were functus officio when they delivered the award on 6 April 1929.
- That Bala Rao's application on 23 January 1929 under Schedule 2, para. 17, Civil P.C., to file the agreement in Court had the legal effect of ousting the arbitrators' jurisdiction.
- That the arbitrators failed to partition certain divisible debts (bonds, promissory notes, money-lending business, bahikhata) by dividing them half and half; instead they allotted the entire debts to Sheo Narain and directed him to pay Rs. 7,000 to Bala Rao, which (the appellant argued) was beyond their authority and invalidated the award.
Respondent's (Bala Rao) Position as Reflected in the Record
- Bala Rao applied on 23 January 1929 to have the agreement of reference filed in Court under Schedule 2, para. 17, Civil P.C.; he subsequently withdrew that application after the arbitrators rendered their award on 6 April 1929.
- On 27 June 1929 Bala Rao applied under Schedule 2, para. 20, Civil P.C., that the award be filed in Court, and this application became Suit No. 21 of 1929. The opinion does not set out detailed legal arguments advanced by Bala Rao in support of the filing of the award; it records the applications and procedural steps taken by him.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Pestonjee Nussurwanjee v. Manokhjee & Co. [1868] 12 M.I.A. 112 | Establishes that a party cannot revoke a submission to arbitration arbitrarily; revocation is not permitted except for good cause (e.g., fraud, coercion, undue influence). | Relied on to reject Sheo Narain's contention that his registered notices revoked the submission; used to hold the revocation plea did not end the agreement of reference and the award was properly made on this ground. |
| Bansi Dhar v. Sital Pershad [1906] 29 All. 13 | Supports the principle that a party may not unilaterally revoke an arbitration submission except for valid grounds such as fraud, coercion or undue influence. | Applied together with other authorities to conclude that Sheo Narain's purported revocation was ineffective and did not render arbitrators functus officio. |
| Bam Chandra Pal v. Krishan Lal Pal [1912] 17 I.C. 600 | Another authority affirming the limited grounds on which a submission to arbitration may be annulled or revoked. | Used with the above precedents to uphold the rule that a mere arbitrary revocation is not permitted; court relied on these to dismiss the revocation objection. |
| Mustafa Khan v. Phulja Bibi [1905] 27 All. 526 | Illustrates that where the submission required division of debts, arbitrators could not travel outside the submission by directing that one party alone collect the debts and account for them, rather than dividing them as required by the reference. | Analogized to the present facts: the court found no real difference between that case and the present matter and used it to hold that the arbitrators exceeded their authority by allotting the debts en bloc and directing a cash payment instead of dividing them. |
Court's Reasoning and Analysis
The court analyzed the appeal in three discrete parts corresponding to the points urged by the appellant:
1. Revocation by Registered Notice (17 October 1928):
The court applied settled authorities (Pestonjee Nussurwanjee, Bansi Dhar, Bam Chandra Pal) to state the legal principle that a party cannot arbitrarily revoke a submission to arbitration; revocation is permissible only for good cause such as fraud, coercion or undue influence. The appellant's asserted ground for revocation—that one arbitrator (Gayadin) had acted as a witness for the prosecution in the Section 107, Criminal P.C. proceedings—was held by the court to be no proper ground for rescinding the agreement of reference. The court therefore concluded that the registered notices did not terminate the arbitration agreement and the arbitrators were not functus officio when they made the award on 6 April 1929.
2. Effect of Bala Rao's Application under Schedule 2, para. 17, Civil P.C. (23 January 1929):
The court considered the contention that Bala Rao's application to file the agreement in Court ousted the arbitrators' jurisdiction. It reviewed the scope of para. 17, Schedule 2, and concluded that the provision empowers the Court to enforce an agreement of reference if the arbitrators have not yet functioned and are ready to act; it does not operate as an ouster of the arbitrators' jurisdiction. On the contrary, para. 17 presupposes that arbitrators retain jurisdiction and contemplates the Court's role in compelling them to exercise it if they are willing. Accordingly, the court overruled the appellant's contention that the January application deprived the arbitrators of jurisdiction.
3. Validity of the Award with Respect to Division of Debts:
The core factual and legal difficulty concerned certain debts and receivables of Ganesh (bonds, promissory notes, money-lending business and bahikhata accounts) amounting to Rs. 14,000. The arbitrators did not divide these debts between the two brothers; instead they treated the debts as realizable assets belonging to Ganesh and allotted them en bloc to Sheo Narain while directing him to pay Rs. 7,000 in cash to Bala Rao as the cash equivalent of Bala Rao's share. The arbitrators explained that the debts should remain in Sheo Narain's possession "because of convenience in realization" and provided a mechanism for recovery if payment was not made.
The court examined the terms of the agreement of reference, which contemplated partition of the deceased's assets and bound the parties to whatever the majority of arbitrators decided in respect of the properties and points in controversy. While acknowledging that arbitrators generally possess wide powers to determine mode of division, the court emphasized that where assets are capable of division, and where the reference requires partition, arbitrators cannot refrain from dividing such assets in the absence of express directions permitting a different course.
The court held that the debts in question were divisible assets and that the arbitrators had no authority, in the circumstances and on the terms of the reference, to allot the entire debts to one party and merely direct a cash equivalent payment. To support this conclusion the court found the facts materially analogous to Mustafa Khan v. Phulja Bibi, where arbitrators had improperly directed that one party alone collect debts rather than dividing them; that earlier decision was applied to show the arbitrators had traveled outside the submission. On this ground the present award was found invalid.
Holding and Implications
Holding: The appellate court allowed the appeal. The court held that although the arbitration agreement was not revoked and Bala Rao's January application did not oust the arbitrators' jurisdiction, the arbitrators exceeded their authority by not dividing the debts that were capable of partition and by allotting those debts en bloc to Sheo Narain with a direction to pay Rs. 7,000 to Bala Rao. As a result, the award was not a valid award for the purposes of filing under para. 20, Schedule 2, Civil P.C.
Core Ruling: The appeal is ALLOWED; the order of the Subordinate Judge dated 10 July 1930 is set aside, and the petition dated 27 June 1929 (application to file the award) is directed to be dismissed.
Implications: The direct legal consequence is that the award cannot be enforced by filing under para. 20, Schedule 2, Civil P.C., and the petition to have the award filed in Court is dismissed. The court made no order as to costs (noting that the appellant had not succeeded on all pleas and because of the manner in which he conducted the case below). The opinion does not purport to lay down any broader new precedent beyond the application of existing authorities to the facts before it; its practical effect is confined to setting aside enforcement of this particular award and dismissing the petition to file it.
This summary is prepared exclusively from the text of the provided opinion. No information has been added beyond what appears in that opinion.
1. This is an appeal by one Sheo Narain defendant in Suit No. 21 of 1929 of the Court of the Subordinate Judge of Jhansi. Sheo Narain and Bala Rao respondents were sons of one Ganesh. Ganesh died leaving considerable property. There was a dispute between his two sons as regards their share in the said property. Mt. Dulari is the widowed aunt of Ganesh. She claimed a right of maintenance.
2. The dispute between Bala Rao and Sheo Narain reached such an acute stage that the police sent up a complaint against them in the Court of the Magistrate recommending that they should be bound over under Section 107, Criminal P.C. During the pendency of the proceedings against them under Section 107, Criminal P.C. two agreements were entered into between Bala Rao and Sheo Narain on 13th September 1928, under which they agreed that their disputes should be referred to the arbitration of a board of arbitrators consisting of seven persons. Mt. Dulari joined in one of these agreements. On 17th October 1928, Sheo Narain gave a registered notice to each one of the seven arbitrators intimating that he had revoked the agreement of reference and that the arbitrators therefore should not proceed to make an award. On 23rd January 1929, Bala Rao, by way of a counter move applied in the Court of the Subordinate Judge of Jhansi under Schedule 2, para. 17, Civil P.C. that the agreements, dated 13th September 1928, be filed in Court. On 6th April 1929, the arbitrators delivered an award. Thereupon Bala Rao withdrew his application dated 23rd January 1929 and presented an application on 27th June 1929 under Schedule 2, para. 20, Civil P.C. that the award be filed in Court. This application was numbered and registered as Suit No. 21 of 1929 in the Court of the Subordinate Judge of Jhansi. Notice of this application was served upon Sheo Narain, who contested the application upon various grounds which are to be found in his petitions dated 50th July 1929 and the 8th August 1929. Only some of his objections are material for the purpose of the appeal before us. The learned Subordinate Judge dismissed the objections of Sheo Narain, upheld the award and directed that a decree be framed in terms of the award. This order of the Subordinate Judge has been challenged in appeal before us by Sheo Narain, and three points have been argued.
3. It has been contended that Sheo Narain had revoked the reference by registered notices, dated 17th October 1928 and that as the result of the said revocation, the arbitrators were functus officio on 6th April 1929 when they delivered the award. It is a settled rule of law that if; is not open to a party to an agreement of reference to revoke the submission to arbitration except for good cause and that a mere arbitrary revocation of the authority is not permitted :" Pestonjee Nussurwanjee v. Manokhjee & Co. [1868] 12 M.I.A. 112, Bansi Dhar v. Sital Pershad [1906] 29 All. 13 and Bam Chandra Pal v. Krishan Lal Pal [1912] 17 I.C. 600. The ground on which the agreements were sought to be revoked was that one of the arbitrators, namely Gayadin, had figured as a witness for the prosecution in the case under Section 107, Criminal P.C. This was no ground at all for reasiling from the agreements. Where parties have once agreed to a submission to arbitration, the agreement is binding and enforceable and cannot be annulled except for some such reason as that the agreement had been obtained by fraud, coercion or undue influence. It is opposed to all legal principles to allow a party to the agreement to revoke it at his sweet will and pleasure. We hold that the plea put forward by Sheo Narain did not put an end to the agreement of reference and that the award was properly made.
4. It is next urged that the legal effect of Bala Rao's application, dated 23rd January 1929 that the agreement of reference be filed in Court was to oust the jurisdiction of the arbitrators. No authority has been cited in support of this contention and we are aware of none. The scope of para. 17, Schedule 2, is no more than this : that where an agreement of reference to arbitration has been entered into by the parties but the arbitrators have not so far functioned, the Court has power to enforce the agreement against the parties where the arbitrators are ready and willing to act in terms of the reference. Para. 17, Schedule 2, far from implying an ouster of jurisdiction, predicates that the arbitrators have the jurisdiction to act on the reference and that the Court should step in and ask them to exercise their powers as arbitrators if they are agreeable to do so. We overrule the contention of the appellant and hold that the application of Bala Rao, dated 23rd January 1929, did not take away the jurisdiction of the arbitrators to make an award.
5. Lastly, it has been urged that the arbitrators have not partitioned the property in dispute according to the terms of the reference and that therefore the award should not be filed under para. 20, Schedule 2, Civil P.C. The material portion of the agreement of reference is as follows:
Where as a dispute has arisen, between us the executants as regards the claim of maintenance of Mt. Dulari and as regards the partition of the assets of Upadhya Ganosh deceased which consisted of bonds, promissory notes, money-lending business, bahikhata account, grain, cash, houses, miscellaneous articles, business, ornaments in hand and in the possession of Mt. Dulari, widow of Sheo Bakhan Lal and whereas this dispute cannot be settled without arbitration, we therefore agree to appoint the following persons as arbitrators and umpire.... Whatever decision is given by the majority of the arbitrators and umpire in respect of the abovenamed properties and in respect of the points in controversy between the parties and their respective rights shall be binding on us.
6. The estate of Ganesh Upadhia consisted inter alia of certain amounts due to him on bonds, promissory notes, money-lending business and bahikhata accounts, the total of which amounted to Rs. 14,000. The arbitrators have not divided these debts half and half between Sheo Narain and Bala Rao. They have treated the entire debts as realizable assets belonging to Ganesh and have allotted them en bloc to the share of Sheo Narain and have directed Sheo Narain to pay in cash Rs. 7,000 to Bala Rao as being the cash equivalent of his share in these assets. They have made the following remark in their award:
That whatever be the genuine valuation of the aforesaid assets of the deceased Sheo Ganesh in possession of Ganesh comprising of bonds, promissory notes, bahikhata account, shall continue as before in possession of Sheo Narain because of convenience in realization, and as Bala Rao is entitled to half its value, in lieu of it, Sheo Narain will pay him Rs. 7,00p in cash and on the failure of the latter to make the payment, the former will be entitled to recover it legally through Court and no objection of Sheo-Narain against it will be maintainable.
7. It has been contended on behalf of the-appellant that having regard to the terms-of the reference, the arbitrators were bound to divide the debts aforesaid half and half between Sheo Narain and Bala Rao, that they were not competent to-allot the whole debt to Sheo Narain and to direct him to pay Bala Rao Rs. 7,000 in cash as the value of his share and that this constitutes a serious legality which, invalidates the entire award. The learned Subordinate Judge was of opinion that the method adopted by the arbitrators-was "very unreasonable" and that "the more discreet arbitrators would have-divided the debts themselves." The Court however held that the scope of the reference was wide enough to enable the arbitrators to deal with the matter in the way in which they had done. The Court observes:
No restriction whatsoever has been placed on the powers of the arbitrators. In dividing a. property between two parties, the arbitrators would have certainly the power to give the property or a larger part to one and to award compensation to the other. The present case is similar to this.
8. We are of opinion that where arbitrators are appointed to make a partition of; certain property, in the absence of express directions, they have an unfettered discretion as to the mode of partition and the consequent allotment of shares. Where the property is of such a nature and character as not to admit of partition, or where the division of the property is calculated to seriously impair its enjoyment, the arbitrators can properly refrain from dividing the property into small portions and allotting them to the several claimants. In such a case the proper course is to allot the property to a particular party and with a view to equalize the share to make the said party pay the money equivalent of the share to the other party or parties who may have a claim therein. The governing idea in the agreement of reference was that the arbitrators were appointed to partition the entire property which descended from Ganesh. The debts formed part of the divisible assets and were clearly capable of partition. The agreement of reference is that the dispute between the two principal claimants was with reference to the partition of that property and the executants asked for a decision from the arbitrators in respect of the abovenamed property and in respect of the points of controversy between the parties and their respective rights thereto. Wide and expensive as these powers are, they did not authorize the arbitrators to refrain from dividing such of the assets as were capable of division. The arbitrators were certainly not justified in directing Sheo Narain to pay Rs. 7,000 to Bala Rao as the cash equivalent of his share. We do 'not see any real difference between the facts of this case and those of Mustafa Khan v. Phulja Bibi [1905] 27 All. 526. In this case, it was the duty of the arbitrators to divide a number of debts outstanding in connexion with a timber trade. The arbitrators did not divide the debts but directed that one of the appellants and he only should collect these debts and account to the other parties in respect of them. It was held that the arbitrators had travelled outside the provisions of the submission and that the award could not be filed.
9. For the reasons stated by us, we are distinctly of opinion that the arbitrators, in not dividing the debts, have not acted according to the scope of the reference and that in view of the circumstances of this case and the terms of the reference they had no authority to allot the debts en bloc to Sheo Narain and to direct that Sheo Narain should pay Rs. 7,000 to Bala Rao. We hold therefore that the award in question was not a valid award and that the Court was not competent to enforce it on an application under para. 20, Schedule 2, Civil P.C. We therefore allow the appeal, set aside the order of the Subordinate Judge, dated 10th July 1930, and direct that the petition, dated 27th June 1929, be dismissed. As Sheo Narain has not succeeded in all his pleas and in view of the way in which he conducted his case in the Court below, we make no order as to costs.
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