The facts which have led up to this appeal may be thus shortly stated. The appellant and the respondent agreed to refer their disputes to the decision of certain arbitrators on the 20th of August, 1912 (Exhibits 1 and 1a). For some time nothing was done under the reference. The appellant sent a notice revoking the arbitration and subsequently filed a suit to enforce his rights ignoring the reference altogether. This was on the 25th of August, 1913 (O. S. No. 77 of 1913). While the suit was pending, the arbitrators gave the award on the 1st of October 1913. Thereupon on the 18th December, 1913, the respondent filed O.S No. 122 of 1913 for a decree in terms of the award. The Lower Court passed a decree as prayed for Mr. K. V. Krishnaswami Aiyar, the learned Vakil for the Appellant, has raised various objections to the decree. The only one which requires consideration is the contention that on the filing of O. S. NO. 77 of 1913, the arbitrators became functus officio, that consequently their award was ultra vires in the in powers and that the Court acted without jurisdiction in passing a decree embodying the terms of the award.
We think this objection is well founded. A short resume of the legislative provisions on this question is necessary to appreciate the appellant's contention. Under Sect. 28 of the Contract Act, it was not ordinarily open to parties to ignore the Courts of the country and to set up a tribunal for deciding their disputes. One exception was recognized to the effect that if the parties had agreed to refer their disputes to arbitration the existence of the agreement shall be a bar to seeking redress in the ordinary Courts. The section also recognized the right of one of the parties to sue for the specific performance of the agreement to refer.
Then came the Specific Relief Act of 1877, which by Sect. 21 took away the right to sue for the specific enforcement of the contract but preserved the right to the party who was willing to abide by the agreement to object to the trial of a suit filed by the other party.
Lastly, we have Sect. 22 of the second schedule to the Civil Procedure Code which has repealed that portion of Sect. 21 of the Specific Relief Act which enabled the defendant to plead the agreement to refer as a bar to the suit. The result of these various legislative provisions is to bring the Indian Law into conformity with the English Law on the subject. The provisions of the Indian Arbitration Act which apply to Presidency Towns and to Karachi are to the same effect.
In our opinion the intent to be gathered from these Acts is that the rights of a party to seek the assistance of the properly constituted Courts of the Realm are unrestricted. The right inhering in a suitor to sue is preserved intact.
In order to provide against the contumacious conduct of a plaintiff who has agreed to refer, but who wants to resile from it by instituting a suit, Sect. 18 of the Second Schedule has been introduced. Under that section, if the Court is apprised that an agreement to refer was entered into, it may stay the trial of the suit. In a given case the Court may consider that the Arbitrators would be able to decide the case far more efficaciously than the Court itself. In such a case the Court may ask the arbitrator to give his decision. But the discretion is in the Court: the paramount idea being that a tribunal constituted by the parties should not come in conflict or usurp the function of the tribunal which the sovereign has provided.
This view receives support from the judgment of Fletcher Moulton, L.J, in Doleman and Sons v. Ossett Corporation. The learned Lord Justice points out that as soon as an action is brought in respect of the subject-matter of the reference, the arbitrators become functus officio. It is also pointed out that the case of an award having been given prior to the suit would be different for then a new right would have been substituted for the original one to enforce which a suit can be instituted. Mr. Govindaraghava Aiyar contended that the language of Sect. 13 of the Second Schedule implies that the arbitrator's jurisdiction ceases only on the settlement of the issues in the suit because it is open to the defendant till then to ask for stay of the suit. We are unable to accept this contention. The time limit for filing objections should not be construed as validating the reference till then.
The learned Vakil for the Respondent also argued that his client had referred to the existence of the agreement to refer and to the award passed, in his written statement, and that further steps should have been taken by the Court with reference to these contentions. He also contended that the adjournment of the trial practically amounted to a stay of the suit. On examining the B Diary we are satisfied that the trial was never stayed as contemplated by Sect. 18 of the Second Schedule. The decision in Ram Chandra Pal v. Krishna Lal Pal was on Sect. 21 of the Specific Relief Act before the last 37 words were repealed. On the other hand, Sheo Babu v. Udit Narain supports the view we have taken.
We must therefore set aside the decree passed in the Respondent's suit O. S. No. 122 of 1913 and dismiss it. It is said that the suit of the Defendant is still pending. In the circumstances we think each party should bear his own costs throughout.
M. R.Appeal allowed.