(In pursuance of an order of reference dated 19-11-1943, by Mockett and Kunhi Raman, JJ., this appeal coming on for hearing the Court delivered the following:—
JUDGMENT
The question referred is whether S. 152 of the Indian Companies Act, 1913, before its amendment by the Arbitration Act, 1940, had the effect of confining an arbitration in which a limited liability company was concerned to an arbitration under the Indian Arbitration Act, 1899, or whether the section left a company free to follow any of the courses contemplated by the Civil Procedure Code as it stood before 1940. Before its repeal Sub-S. (1) of S. 89 of the Code made this provision of law—
“Save in so far as is otherwise provided by the Indian Arbitration Act, 1899, or by any other law for the time being in force, 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.”
The second schedule provided for an order of reference to arbitration being made in a suit, for an order of reference being passed without any suit being filed and for the case where an arbitration had taken place without the intervention of a Court. In all these cases the Court could pronounce judgment according to the award and pass a decree.
In the present case the Catholic Bank Ltd., Mangalore, a company registered under the Indian Companies Act, entered into an agreement outside the Court for a reference to arbitration and obtained an award for payment of the sum of Rs. 53,500 with interest. Thereupon the Bank filed an application in the Court of the Subordinate Judge of South Kanara for the execution of the decree. The objection was taken that a company could only embark on arbitration under the terms of the Indian Arbitration Act, 1899, and that consequently the District Court alone had jurisdiction. The contention was upheld by the Subordinate Judge, who followed the judgment of the Calcutta High Court in Jhirighat Native Tea Co. Ltd. v. Bipul Chandra Gupta (1) which dissented from the opinion of the Lahore High Court expressed in Sitaram Balmukund v. Punjab National Bank Ltd. (2). After the Subordinate Judge's decision, a Bench of this Court (Somayya and Happell, JJ.) in The Karnataka Bank, Ltd., Mangalore v. Singarayya (3), indicated preference for the Lahore opinion, but the learned Judges before whom this appeal came in the first instance considered the Calcutta view to be the right one and to avoid further controversy so far as this Court is concerned have made this reference to a Full Bench.
The Lahore High Court held that S. 152 of the Indian Companies Act, 1913 did not deprive a company of the advantages of the provisions of the Civil Procedure Code, because it considered that the section was only intended to enable a company to take advantage of the Indian Arbitration Act and not to compel it to proceed under that Act should it decide to refer a dispute to arbitration.
Before the amendment in 1940, sub-Ss. (1) and (3) of S. 152—Sub-S. (2) has no bearing—read as follows:
“(1) A Company may by written agreement refer to arbitration, in accordance with the Indian Arbitration Act, 1899 an existing or future difference between itself and any other company or person.
(3) The provisions of the Indian Arbitration Act, 1899, other than those restricting the application of the Act in respect of the subject matter of the arbitration, shall apply to all arbitrations between companies and persons in pursuance of this Act.”
It is common ground that the words “other than those restricting the application of the Act in respect of the subject matter of the arbitration” in Sub-S. (3) have reference to the restrictions contained in S. 2 of the Arbitration Act. 1899. The first clause of that section applied the Act to cases, where, if the subject matter submitted to arbitration were the subject of a suit, the suit, could whether with leave or otherwise, be instituted in a Presidency town. The second clause of the section contained a proviso empowering the Provincial Government, by notification in the Official Gazette, to declare the Act applicable in any other local area as if it were a Presidency town. No such notification was issued and therefore the Act so far as its own provisions were concerned only applied to Presidency towns, but by reason of the insertion of the words “other than those restricting the application of the Act in respect of the subject matter of the arbitration” in Sub-S. (3) of S. 152 of the Companies Act its application, so far as companies were concerned, was made general.
In holding that S. 152 was merely an enabling section the Lahore High Court laid stress on the word “may” and considered that if the procedure laid down in the section were applicable the words “in pursuance of this Act” occurring at the end of the Sub-S. (3) would seem to be wholly redundant. The Court also attached importance to the fact that the Civil Procedure Code itself contained no indication that, a company was to be excluded from the benefits of Schedule II. On the other hand the Calcutta High Court considered that S. 152 of the Companies Act meant that the provisions of the Indian Arbitration Act, 1899 except S. 2 which was to be treated as nonexistent, should apply to all arbitrations between companies and persons by the force and effect of the Companies Act itself. The Lahore High Court had, in the opinion of the Calcutta High Court, erroneously read the words “in pursuance of this Act” in Sub-S. (3) as meaning “in pursuance of Sub-S. (1)” or the words “in pursuance of this section.”
In our judgment the decision of the Calcutta High Court is to be preferred. S. 88 of the Companies Act 1913 gave a company the same right of entering into a contract as was possessed by a private person. The insertion of S. 152 shows that the Legislature intended that companies should be put on a special basis in the matter of arbitration. They were to proceed under the Arbitration Act, the territorial restriction of which, so far as they were concerned, was to be abolished. If this view is right, as we think it is, the word “may” in S. 152 must be read as “must.” As pointed out by Jessel M.R in Ex parte Stephens, where there is a special affirmative power given which would not be required because there is a general power it is always to be read to import the negative.
An examination of the provisions of the corresponding sections of the Companies Act, 1882 lends support for the proposition that the Legislature did not intend to put companies on the same basis as persons in reference to arbitration. S. 67 of that Act provided that contracts might be made on behalf of a company in these ways:
(a) A contract, which if made between private persons would be by law required to be in writing, and if made according to English law, to be under seal, might be made on behalf of the company in writing under the common seal of the company;
(b) A contract, which if made between private persons would be by law required to be in writing signed by the parties to be charged therewith, might be made on behalf of the company in writing signed by a person acting under the authority of the company;
(c) A contract, which if made between private persons would by law be valid, although made by parol only and not reduced to writing, might be made by parol by a person on behalf of the company acting under the authority of the company.
The corresponding section to S. 152 of the present Act was S. 96, which said that a company might from time to time, by writing under its common seal, agree to refer, and might refer, to arbitration any matter whatsoever in dispute between itself and any other company or person. The fact that under the Companies Act, 1882 a company could only refer a dispute to arbitration when it agreed to do so under seal appears to us to be a clear indication that the Legislature at an early stage contemplated companies and persons being placed on different footings.
It follows that we share the opinion of the Calcutta High Court with regard to the effect of the words “in pursuance of this Act” in Sub-S. 3 of S. 152 of the Indian Companies Act, 1913, and that we can see nothing in the Civil Procedure Code which militates against the acceptance of the section as a mandatory provision of law. On the contrary Sub-S. (1) of S. 89 Civil Procedure Code supports the proposition. It makes the second Schedule applicable to references to arbitration only “save in so far as is otherwise provided by the Indian Arbitration Act, 1899, or by any other law for the time being in force.” “S. 152 of the Indian Companies Act 1913, as it stood before its amendment, in 1940, was another law for the time being in force and therefore was the overriding law so far as companies were concerned.
For these reasons we would answer the question referred by saying that after the enactment of the Indian Companies Act, 1913, and before the Indian Arbitration Act, 1940, came into force a company could only enter into an arbitration under the provisions of the Indian Arbitration Act, 1899 and consequently companies were outside the scope of Schedule II Civil Procedure Code.
The costs of the reference will be made costs in the appeal.
N.R.R