Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Messrs. S. Srinivasaraghavan and K. Vaitheeswaran for Appt.
  • Messrs. Subramanyam and Rajagopal for Respt.
Judges
  • Somayya, J.
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
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Messrs. S. Srinivasaraghavan and K. Vaitheeswaran for Appt.
  • Messrs. Subramanyam and Rajagopal for Respt.
Judges
  • Somayya, J.
Acts
See more information ...
Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The dispute arose from contracts for sale (by the plaintiff-respondent) and purchase (by the defendants-appellants) of certain quantities of Japan camphor. The respondent alleged that the appellants did not take delivery of the contracted camphor, that the respondent subsequently sold the camphor and sustained a loss which the appellants refused to pay. The contracts contained an arbitration clause and the disputes were referred to the Madras Kirana Merchants Association, which passed an award. The respondent filed a suit to recover the sum adjudged by the arbitrators. The defendants contended that the remedy is confined to the procedure under the Indian Arbitration Act of 1940. The lower Court held that a separate suit lies and granted a decree in favour of the respondent. The defendants appealed. The sole point for decision on appeal was whether a separate suit lies to recover a sum of money adjudged by an arbitration award under the Indian Arbitration Act X of 1940 or whether the procedure under S.14 of that Act must be followed.

Legal Issues Presented

  1. Whether a separate civil suit lies to enforce or recover the reliefs granted by an award passed under the Indian Arbitration Act X of 1940, or whether the successful party must instead resort to the procedure prescribed by S.14 (filing the award in Court) and obtain a decree under S.17.
  2. Whether questions regarding the existence, validity or effect of an award (when raised in the context of a suit filed by the successful party) can be decided by a Court other than the Court in which the award may be filed, in view of S.31, Cl. (2), S.32 and S.33 of the Act.

Arguments of the Parties

Respondent's Arguments

  • The respondent (successful party in the arbitration) claimed a right to file a separate suit to enforce the award and recover the sum adjudged by the arbitrators.
  • The respondent's Advocate maintained that the unsuccessful party's remedy to challenge the award is by proceeding under the Act (Ss. 32 and 33), not by contesting a separate suit brought by the successful party.
  • It was argued on behalf of the respondent that, in a suit by the successful party to obtain the award reliefs, the defendant cannot raise the question of the validity of the award and must submit to a decree without defence (as contended by respondent's counsel).

Appellants' Arguments

  • The defendants-appellants contended that the respondent was confined to the statutory remedy under the Indian Arbitration Act of 1940 and could not maintain a separate suit to enforce the award.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Nanhalal Anandilal v. Singhai Gulabchand (decision by Pollock, J.) Held that a successful party may file a suit to enforce an award without resort to proceedings under the Arbitration Act (i.e., that a separate suit lay). The Court noted that this decision is directly in favour of the respondent but observed the judgment was short and did not advert to S.31, Cl. (2). The present Court declined to follow it because S.31, Cl. (2) indicates that questions as to existence, validity or effect of an award are for the Court in which the award is filed.
Deoki Nandan Dalmia v. Basantlal Ghanshyamdas Held that after Act X of 1940 a suit does not lie where the relief sought would affect the arbitration agreement or award; the appropriate remedy is an application under the Act (Ss. 32–33). The Court treated this decision as supportive of the proposition that claims which would affect the arbitration agreement or the validity/effect of an award must be dealt with under the Act and not by separate suits; it bolstered the conclusion that successful parties must enforce awards by filing them under S.14 and obtaining a decree under S.17.

Court's Reasoning and Analysis

The Court undertook a close textual analysis of the relevant provisions of the Indian Arbitration Act X of 1940 to determine the correct procedure for enforcing an award and for challenging it:

  • The Court summarized the statutory regime: S.14 requires arbitrators to sign the award and, at the request of a party (or when directed by the Court), to cause the award or a signed copy to be filed in Court and the Court to give notice of filing; Ss. 15–16 permit modification, correction or remittance by the Court in certain cases; S.17 directs the Court to pronounce judgment according to the award and follow with a decree where there is no cause to remit and after the time for making applications to set aside has expired or such applications have been refused.
  • The Court emphasized S.31, Cl. (2), which states (in full quoted form in the opinion) that "all questions regarding the validity, effect or existence of the award... shall be decided by the Court in which the award under the agreement has been, or may be, filed and by no other Court." The Court regarded this clause as especially important and as a clear statutory directive limiting which Court can decide such matters.
  • The Court examined S.32, which provides that no suit shall lie on any ground for a decision upon the existence, effect or validity of an arbitration agreement or award and that no arbitration agreement or award can be modified or amended otherwise than as provided in the Act; and S.33, which prescribes that any party desiring to challenge existence or validity of an arbitration agreement or award shall apply to the Court and that the Court shall decide the question (initially on affidavits, subject to directions for further evidence).
  • Accepting the respondent's counsel's concession that an unsuccessful party wishing to question an award must resort to Ss. 32–33, the Court nevertheless concluded that this concession, combined with the statutory language of S.31, Cl. (2), affects the question whether a successful party may pursue a separate suit to enforce an award. The Court reasoned that where a successful party sues to enforce the award, the plaintiff must prove the existence of the award; if the defendant challenges existence, validity or effect, a question as to those matters is directly raised in the suit. But S.31, Cl. (2) expressly restricts determination of those questions to the Court in which the award may be filed and by no other Court.
  • On this basis the Court concluded that a successful party is likewise constrained to the procedure under the Act (i.e., having the award filed under S.14 and then obtaining judgment and decree under S.17) rather than resorting to a separate suit. The Court found earlier decisions before the Act inapplicable and regarded the short decision in Nanhalal Anandilal (which allowed a separate suit) as unpersuasive because it did not address S.31, Cl. (2). The Court also found Deoki Nandan Dalmia supportive of the statutory interpretation that questions which affect arbitration agreements or awards must be addressed under the Act.

Holding and Implications

Holding: The decree of the lower Court is reversed and the suit is dismissed with costs here and in the lower Court.

Implications:

  • Direct effect on the parties: The plaintiff-respondent's separate suit to recover the sum adjudged by arbitration is dismissed; the decree previously granted by the lower Court is reversed.
  • Procedural consequence articulated by the Court: A party seeking to enforce an award is to proceed by having the award filed in the appropriate Court under S.14 and by obtaining judgment and decree under S.17; questions as to the existence, validity or effect of an award must be determined by the Court in which the award is or may be filed pursuant to S.31, Cl. (2), and challenges must be made under Ss. 32–33 of the Act.
  • The opinion does not set out any broader implications beyond these direct effects and statutory directives; the immediate consequence is the dismissal of the separate suit and the requirement to follow the statutory procedure under the Indian Arbitration Act X of 1940 for enforcement or challenge of awards.

Disposition: Decree of the lower Court reversed; suit dismissed with costs.

Show full summary ...

    Rashid Jamshed Sons & Co., By Its Proprietor, S.R Ahestani v. Moolchand Jothajee

    The question involved in this appeal is whether a separate suit lies to enforce the reliefs granted by an award passed under the Indian Arbitration Act X of 1940 or whether the procedure under S. 14 of the Act must be resorted to.

    There were disputes between the parties regarding certain contracts which they entered into for sale by the plaintiff-respondent and for purchase by the defendants-appellants of certain quantities of Japan camphor. The case of the respondent is that the appellants did not take delivery of the camphor contracted for, that subsequently he sold the camphor and sustained loss which the appellants would not pay, that the disputes between the parties were referred to the arbitration of the Madras Kirana Merchants Association in accordance with a clause contained in the contracts to that effect and that an award was passed by the arbitrators. The suit is for recovery of the sum adjudged by the arbitrators by the award. The defence is that the respondent is confined to the remedy under the Indian Arbitration Act of 1940 which, it is the common case of both the parties, applies to this case. The lower Court held that a separate suit lies and granted a decree. The defendants appeal, and the only point for decision is whether a separate suit lies to recover a sum of money adjudged by the award in favour of a party to the arbitration.

    It is undoubted that before the Indian Arbitration Act X of 1940, where there was an arbitration and an award, two remedies were open to the successful party. One was to have the award filed into Court under the Indian Arbitration Act of 1899 or under Schedule II of the Code of Civil Procedure and to have it made a rule of Court. The other was to file a suit for the recovery of the sum adjudged or of the property given by the award. It is equally clear that in a suit filed by the successful party, the defendants had before this Act a right of challenging the validity of the award, on the ground that all the arbitrators did not act together or on other grounds open to them. The respondent's learned Advocate while claiming a right of separate suit to a successful party, maintains that the remedy of the unsuccessful party is only to proceed under the Act if he wishes to challenge the validity of the award. He also contends that in a suit by the successful party for getting the relief which is given under the award the defendant cannot even raise the question of the validity of the award and that he must submit to a decree without any defence. Thus stated the position is rather anomalous, but if the law says so, the respondent's contention must be upheld. But before the Court arrives at this rather anomalous result, the provisions of the Act must be closely scrutinised. Under S. 14 of the Act, where the arbitrators have made an award, they are to sign it and give notice in writing to the parties of the making and signing of the award. Cl. 2 provides:

    “the arbitrators shall………at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court……cause the award or a signed copy of it….to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the award.”

    Sections 15 and 16 provide that the Court may modify or correct an award in certain cases or remit the award on any matters referred to arbitration for reconsideration. S. 17 provides that where the Court sees no cause to remit the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced, a decree shall follow. S. 31, Cl. (1) of the Act provides that an award shall be put into Court having jurisdiction in the matter to which the reference relates. Cl. (2) of S. 31 is important and it may be set out in full:

    “Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of the award….shall be decided by the Court in which the award under the agreement has been, or may be, filed and by no other Court.”

    Section 32 provides that notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award and that no arbitration agreement or award can be modified, or amended otherwise than as provided in the Act. S. 33 says that:

    “Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits.”

    But the Court may direct further evidence, as it may do in a suit. These are the provisions which are relevant for the decision of the question at issue. I am inclined to accept the argument of the respondent's Counsel that if a person who is unsuccessful wishes to question the existence, validity or effect of the award, he is bound to do so only by resort to Ss. 32 and 33 of the Act. S. 33 expressly provides that a person who desires to question the validity or existence of the award shall apply to the Court and that the Court shall decide the question. S. 32 says that no suit shall lie for a decision upon the existence, effect or validity of an award and it also says that no award shall be set aside, modified or amended or in any way affected otherwise than provided in the Act. It is clear therefore that a person who wants to challenge even the existence of an award must do so by resort to an application under S. 33. This view receives additional support from the provisions of S. 31, Cl. (2) which says that:

    “all questions regarding the validity, effect or existence of an award—shall be decided by the Court in which the award has been or may be filed and by no other Court.” (the italic are mine).

    That being so, the question is whether the successful party is bound to have the award filed in Court under S. 14 and to get a decree under S. 17 of the Act. Where a successful party files a suit to obtain the relief that is granted to him by the award, it cannot be gainsaid that the plaintiff must prove the fact of the award, i.e, its existence, before he can get relief. When the other side questions the existence, or validity or effect of the award, a question regarding the existence, validity or effect of the award is directly raised. If an award is alleged by the plaintiff, obviously the defendant must be allowed to raise the question of the existence of the award. But under S. 31, Cl. (2) even the existence of the award shall not be determined by any Court except the Court in which the award may be filed. This provision indicates that even a successful party to whom a relief is given under the award must seek to enforce it in the Court in which the award may be filed, that is, by proceeding under S. 14 of the Act.

    Decisions before the Act are obviously of no help. The only help that we have on this object is Pollock, J., in Nanhalal Anandilal v. Singhai Gulabchand (1). The learned Judge held that a successful party may file a suit without resort to proceedings under the Act. That is no doubt a direct decision in favour of the respondent. But the judgment is very short and the learned Judge does not advert to S. 31, Cl. (2). First he refers to the fact that it was open to a person interested in an award to sue for the enforcement of the award before the Act. Then he dealt with the argument put before him that S. 32 of the Arbitration Act took away the right. He dealt with that question and pointed out that as indicated by the marginal note to that section, the section applied only to the case of a person who desired to challenge the validity of the award and not to a case where a person wanted to enforce the award.

    It is urged that the wording of S. 32 is wide enough to cover a case of a successful party seeking the reliefs granted by the award and that the marginal note ought not to be allowed to control the effect of the plain wording of the section. It is unnecessary to go into this question because, in my view, S. 31, Cl. (2) contains a clear indication that even a successful party has no right of a separate suit.

    In Deoki Nandan Dalmia v. Basantlal Ghanshyamdas (2), a party to a contract containing an arbitration clause filed a suit for a declaration that the contracts were wagering contracts and therefore illegal. The suit was filed after a reference was made by the other party to the Bengal Chamber of Commerce, the arbitrators named in the contracts. The real object of the suit was to restrain the defendant from proceeding with the arbitration before the Bengal Chamber of Commerce. Lort Williams, J. held that after Act X of 1940, the suit does not lie and that the only remedy is an application under the Act. After setting out Ss. 32 and 33 of the Act, the learned Judge said this:

    “The prosecution of the claims of the plaintiff will undoubtedly affect the arbitration agreement and a decision in his favour would result in a declaration that the agreement did not exist, or a decree setting it aside.”

    Referring to decisions before the Act, the learned Judge said:

    “That Act was intended to and did alter the law and one of the main objects of the Act was to provide that claims to set aside arbitration awards or challenge arbitration agreements should be made by applications to Court.”

    This was a decision dealing with the right of a party who wanted to get round the arbitration agreement. The ground of decision is that though in form it was a suit to declare the contract illegal on the ground of its being a wagering contract, the declaration if given would affect the validity of the arbitration agreement and that this question can be decided only in a proceeding under the Act. Similarly if a party to whom some reliefs are given by the award seeks to enforce them as a plaintiff and the defendant says that the award does not exist or that it is not valid or that the effect of the award is not what the plaintiff claims to be in his plaint, that question cannot be gone into by any Court other than “the Court” indicated by the Act.

    The decree of the lower Court is reversed and the suit is dismissed with costs here and in the lower Court.

    N.R.R

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Rashid Jamshed Sons & Co., By Its Proprietor, S.R Ahestani v. Moolchand Jothajee
    (Mar 28, 1945)