Annamalai Chettiar vs Egappa Chettiar

Ratnam, J.—The defendant, who succeeded in the trial Court and lost before the lower appellate Court, is the appellant in this Second

Appeal which raises an interesting and important question with reference to the maintainability of the suit instituted by the respondent herein for the

recovery of a sum of Rs. 8,520/-. being the principal and interest due as per an award dated 26.2.1968, which has not been a rule of the court

under which the defendant is bound to pay a sum of Rs. 6,000/-. to the plaintiff with interest at 12 per cent per annum. The plaintiff, defendant and

the three others who are not parties to this litigation are divided brothers and the family owned estates in Malasia besides other movable and

immovable properties and a family business of the name-PL.M.Firm. The appellant herein disposed of a portion of the estate belonging to the firm;

but had retained the amounts with him. In addition to the aforesaid items, the family owned other immovable properties, assets, bank deposits etc.,

both outside India and at Koppannapatti village and Cuddalore in India. In order to secure a fair and just division of the assets and in order to

expedite the same, all the five brothers along with their mother voluntarily executed a muchalikka dated 10.1.1968 by which, seven panchayatdars

were appointed and the parties agreed to abide by the decision of the Panchayatdars. On 26.2.1968, an Award was passed by the Panchayatdars

which, among other items, fixed the realisation of the sale proceeds of the estate in Muar at Rs. 30,000/-. and the share of the plaintiff therein was

fixed at Rs. 6,000/-. and the defendant was directed to pay the abovesaid sum of Rs. 6,000/-. to the plaintiff within one month from 26.2.1968.

According to the case of the plaintiff, the defendant also agreed to abide by the abovesaid direction and accordingly, the plaintiff claimed that he is

entitled to get the amount of Rs. 6,000/-. with interest at 12% per annum from 26.2.1968. In order to realise this amount, the plaintiff issued a

notice on 12.9.1970, which was received by the defendant on 16.9.1970, but the amount was not paid and hence, the suit was instituted for

recovery of this amount. The defendant was served with summons in the suit; but he chose to remain ex parte and did not put forth any defence to

the claim made in the suit. The plaintiff was examined as P.W. 1 and he filed Exs. A-1 to A-3. The learned Subordinate Judge, Pudukkottai felt a

doubt whether the suit on the original side lies for enforcing an Award under the Arbitration Act of 1940 or it has to be filed as an Original Petition

for having the award filed into Court under S. 14 of the Arbitration Act and passing a decree thereon. On this question, the learned Subordinate

Judge concluded that the suit as framed is not maintainable and dismissed the same. Aggrieved by that, the plaintiff preferred an Appeal in A.S.

No. 519 of 1971, District Court, Tiruchi. In that appeal, notice to the appellant was dispensed with and the appeal was allowed on 17.7.1972.

Thereafter, the defendant, coming to know of the ex parte disposal of the Appeal, filed an application in I.A. No. 768 of 1973 for re-hearing the

appeal. On 19.10.1973, that application was allowed on terms and the defendant was directed to deposit the suit amount and costs on or before

6.11.1973 and in compliance with the said direction, the suit amount and costs were deposited on 5.11.1973 and the appeal was therefore re-

heard as A.S. No. 167 of 1974 by the learned District Judge, Pudukkottai. The learned District Judge held that the bar contained in S. 32 of the

Arbitration Act cannot apply to suits based on an agreement entered into subsequent to the award and therefore, the suit was perfectly

maintainable. In this view, the Judgement and decree of the learned Subordinate Judge were set aside and the suit was decreed as prayed for with

costs throughout.

In this Second Appeal, the Learned Counsel for the appellant raised two contentions. The first is that S. 32 of the Arbitration Act would be a

bar to the maintainability of the suit and therefore, the suit ought not to have been entertained. Secondly, it was contended by the Learned Counsel

for the appellant that in as much as the award dated 26.2.1968 also purports to create an interest in the immovable property, it is registrable and in

the absence of registration, the agreement on the basis of which the suit is laid cannot be looked into and therefore, the suit should be dismissed.

On the contrary, the Learned Counsel for the respondent contends that the relief sought for in the suit does not turn upon the existence, effect or

validity of the arbitration agreement or award and that the suit is laid only on the basis of the later acceptance by the defendant of the liability under

the award and therefore, the suit will not be hit at by S. 32 of the Arbitration Act. In addition, he also contends that there is no question of

registration with reference to the enforceability of the money portion of the claim accepted by the defendant and sought to be enforced in the suit,

though the agreement contained other terms with reference to the immovable property as well.

In order to appreciate the true basis on which the suit has been laid, it becomes necessary to refer to the allegations in the plaint. In paragraph 7

of the plaint, after referring to the realisation of a sum of Rs. 30,000/-. and claiming that the plaintiff is entitled to a sum of Rs. 6,000/-. it is

specifically stated that the defendant had accepted his liability and had also agreed to pay the same and that this acceptance and agreement by the

defendant is evidenced on the award. Again in paragraph 12 of the plaint, which refers to the cause of action for the suit, it refers to an agreement

dated 26.2.1968 by which the defendant had agreed to pay the sum of Rs. 6,000/-. to the plaintiff. A perusal of the allegation in paragraphs 7 and

12 of the plaint indicates that it is not on the basis of the award that the plaintiff has laid the suit. This is also made clear from the notice Ex. A-2,

dated 12.9.1970 issued by the plaintiff before the institution of the suit to the defendant and which has been acknowledged by the defendant under

Ex. A-3 dated 16.9.1970. In that notice, the plaintiff has categorically alleged that the defendant, in acceptance of the terms of the award, had paid

some of his brothers, but had not paid the plaintiff only. There has been no reply whatever to this notice by the defendant. It must also be

mentioned that it Ex. A-1 the award, dated 26.2.1968, (sic) panchayatdars have affixed their signatures. Thereafter, the plaintiff, the defendant an

we others have also subscribed their signatures staying that they are willing to act according to the decision of the panchayatdars. The recitals in the

plaint referred to above taken along with the notice Ex. A-2 when considered in the light of the acceptance of the liability as embodied in Ex. A-

(sic) would indicate that the claim that is sought to be enforced in the suit is not on the basis of the award itself, but only on the agreement entered

into between the plaintiff and the defendant. It is in this connection that the Learned Counsel for the respondent invited my attention to the decision

reported in Tha. Duraiswami Naidu Vs. Krishnappa Naidu, . That was a suit for specific performance a contract of sale entered into by the

defendant and for possession of the property. The agreement was sought to be proved by the filing of the arbitration agreement as well as a

decision or award by some of the arbitrators and the endorsement made on the decision by the plaintiff and the defendant. The question that arose

was whether the suit was barred by S. 32 of the Arbitration Act. Dealing (sic) this objection, Subrahmanyam, J. held thus :

In the case before us, the suit was not to enforce and (sic) It was to enforce an agreement whose terms had to be ascertained by reading a

document which was called an award. The arbitration agreement Exhibit A-1 purports to refer the disputes between the parties to the arbitration of

thirteen (sic) including the writer, Duraisami. The arbitration agree (sic) says that the parties would be bound by any decision (sic) might be given

by the arbitrators unanimously. The arbitrators, who have signed the decision, Exhibit A-1 (a) (sic) including the writer, Doraisami. The decision,

therefore we not an award capable of being filed under S. 14 or giving (sic) rights or obligations as between the parties to the agreements. On that

decision or ''award'' the parties made an endorsement that they with one mind accepted the decision. If the (sic) signed that endorsement freely and

voluntarily consenting to the terms of the document referred to as the decision and knowing that it was not enforceable as an award then, the (sic)

to enforce that agreement would be maintainable.

In the instant case, the award had been signed by all the arbitrators and the plaintiff and the defendant and two others have also appended their

signatures to the document styled as an award undertaking to be bound by the terms thereof. It is not the case of the defendant that this signature

was forcibly taken or that he was not aware of the terms of the document. Therefore, the present suit, which seeks to enforce the agreement signed

by the plaintiff and the defendant as embodied in Ex. A-2, does not in any manner raise a question with reference to the existence, effect or validity

of that award so as to attract the operation of S.32 of the Arbitration Act. The Learned Counsel for the respondent invited my attention to the

judgement of the Supreme Court reported in Kashinathsa Yamosa Kabadi, etc. Vs. Narsingsa Bhaskarsa Kabadi, etc., and contended that where

an award made in arbitration out of court is accepted by the parties and acted upon voluntarily and a suit is thereafter sought to be filed by one of

the parties ignoring the acts done pursuant to the acceptance of the award, the defence that the suit is not maintainable is not founded on the plea

that there is an award which bars the suit, but the parties have by mutual agreement settled the dispute and that the agreement and the subsequent

acts of the parties are binding. In the present case also, the suit is laid not on the basis of the award, but the acceptance of the award by the parties

and the independent agreement between the plaintiff and the defendant to be bound by the terms thereof and the payment made by the defendant

to some other brothers and not to the plaintiff as mentioned in Ex. A-2 in furtherance of such acceptance of the terms of the award. A Full Bench

of our Court in C. Mohamed Yousuf Levai Saheb v. S. Hajee Mohammed Hussion Rowther (died) and Others 1963 2 M.L.J. 287=76 L.W. 482

in dealing with the question whether an unfiled award, if later accepted by the parties thereto, can afford a fresh cause of action, held that it can. At

page 296, Ramachandra lyer, C.J., after referring to the observations made by the Supreme Court in Kashinathsa Yamosa Kabadi, etc. Vs.

Narsingsa Bhaskarsa Kabadi, etc., stated thus;

The next question, namely, whether an unfiled award, if later accepted by the parties thereto would constitute a fresh cause of action presents no

difficulty as the same has been decided by the Supreme Court in Kashinathsa Yamosa Kabadi, etc. Vs. Narsingsa Bhaskarsa Kabadi, etc., . In

that case there was an invalid award. Subsequently the parties accepted the arrangement contained in the award. The Supreme Court held that S.

32 of the Arbitration Act would be no bar to a defence on the basis of such acceptance.

The acceptance of the award is not only indicated in the award itself by the affixing of the signatures of the plaintiff and the defendant thereto, but

the definite case of the plaintiff is that in furtherance of such acceptance, payments had been made by the defendant to the other brothers excepting

himself. This would be sufficient to constitute later acceptance of the terms of the award and the performance of the acts pursuant to such

acceptance which would give rise to a fresh cause of action for the institution of the suit. There is, therefore, no substance in the contention of the

appellant that S. 32 of the Arbitration Act would bar the suit. The next objection raised by the Learned Counsel for the appellant is that in as much

as the award refers to immovable as well as movable properties in addition to payment of moneys thereunder to the respective parties and the

document had not been either registered or stamped, it cannot be looked into. In other words, the award, according to the Learned Counsel for

the appellant purports to create, declare, assign, limit or extinguish right, title or interest in immovable property of the value of Rs. 100/-. and

therefore, it is compulsorily registerable. In this connection, the Learned Counsel for the appellant relies upon the judgement of the Supreme Court

reported in Satish Kumar and Others Vs. Surinder Kumar and Others, Satish Kumar and Others Vs. Surinder Kumar and Others, . In that case,

an arbitrator appointed by the appellants and the respondent effected a division or the immovable property exceeding the value of Rs. 100/- and

an application under S. 14 of the Indian Arbitration Act, 1940 was filed for making the award a rule of the court. On the question whether the

award was admissible in evidence as it was not registered the Supreme Court held that the award in question was not a mere waste paper, but had

some legal effect and it plainly purports to affect property within the meaning of S. 17 (1)(b) of the Registration Act. Justice Hedge points out that

it is one thing to say that a right is not created; but it is totally different to say that the right created cannot be enforced without further steps and

ultimately held that the award in that case purported to create right in immovable property and therefore, was compulsorily registrable. It does not

appear whether, on the facts of that particular case, the award comprised of immovable properties only or it took in other matters like payment of

money, etc. by one party to the other. In the instant case, the plaintiff and the defendant have agreed to accept the suggestion of the pachayatdars

not only with reference to the allotment of some properties, but also to make and accept payments. The recommendation of the panchayatdars,

accepted by the plaintiff and the defendant with reference to the immovable properties, is distinct and separate from the recommendation with

reference to the payment of moneys and one has no connection with the other. It is in this context that the Learned Counsel for the respondent

invites my attention to the judgment of the Supreme Court reported in Mattapalli Chelamayya and Another Vs. Mattapalli Venkataratnam and

Another, . Palekar, J. while dealing with the question of admissibility in evidence of an award, part of which required registration and part of which

does not, stated that the direction to pay a sum of money which has been held due and payable by the appellants to the respondents is a direction

giving effect to liability which already existed and it does not create the liability for the first time, but merely works out the liability. With reference to

the creation of a charge for the payment of that amount, the Supreme Court observed that the charge was created for the first time and therefore,

the award involved two distinct matters, viz., (1) a personal liability to pay a certain amount, and (2) an additional relief to recover that amount

from the immovable property in the event of failure to pay. Therefore, the Supreme Court held that the two do not form one transaction but two

severable transactions, one creating an independent personal obligation to pay certain sum of money and the other strengthening the first

transaction by the creation of a charge and therefore, the second transaction with regard to the charge being a severable transaction can be validly

ignored, and to the extent to which the award declares the personal obligation to pay, the transaction, not being required to be compulsorily

registered, the award would be admissible in evidence. In view of this, there is no substance in the objection raised by the Learned Counsel for the

appellant. In the result, therefore, the Second Appeal has got to fail and is accordingly dismissed. But, in the circumstances, there will be no order

as to costs.