Kantian Naif vs Kelu Nair and Others

Joseph J

This Civil Revision Petition arises from an order dated 6th March 1962, revoking a reference to arbitration made by Court. By the time the order was passed, the arbitrator had filed the award which was also set aside by the order. The suit was one for partition of tarwad properties. On 14-9-1960 the second defendant filed into court a muchalika executed by the parties to the suit and prayed that the matters in dispute in the suit be referred to arbitration. The application was not opposed and the court referred the matter to the arbitrator on 21-9-1960, directing him to file the award within three months. The time was extended more than once. Before the award was filed into court the plaintiff applied on 12-2-1961 to revoke the reference mainly on two grounds, namely, (f) that while the muchalika executed on 26-2-1960 had fixed a period of only three months for giving the award, the application for reference and the order of reference were made beyond the time fixed by the parties and (2) that the reference was made without the consent of all the parties. The second respondent (2nd defendant) opposed the application for cancellation of the reference. In the meanwhile the arbitrator filed the award on 30-5-1961. In view of the order setting aside the order of reference, the award was also set aside. The second defendant has preferred this civil revision petition against the order dated 6-3-1962.

The first point urged on behalf of the petitioner is that section 5 of the Arbitration Act which provides that the authority of an appointed arbitrator or umpire shall not be revoked except with the leave of the court unless a contrary intention is expressed in the arbitration agreement, is not applicable to a case like this where the reference is made by Court. It was argued that a reference to arbitration by Court should be governed by the provisions of Chapter V alone and that section 5 which occurs in Chapter II cannot apply to such a case. Section 25 is a complete answer to this contention. Section 25 provides:

The provisions of the other Chapters shall, so far as they can be made applicable, apply to arbitrations under this Chapters. Provided that the Court may, in any of the circumstances mentioned in Sections 8, 9, 10, 11 and 12 instead of filling up the vacancies or making the appointments, make an order superseding the arbitration and proceed with the suit, and where the Court makes an order superseding the arbitration u/s 19, it shall proceed with the suit.

Reported cases show that in appropriate cases courts have revoked orders of reference to arbitrators (See Satyawan Prasad Vs. Kunj Behari Lal, and G. Lal v. Firm B. Lai & Co. ( AIR 1959 Pun 593)).

Another point urged was that there was no application to set aside the award. The application for revoking the reference was made on 20-2-1961. The award was filed later i.e., on 30-5-1961. It is true that the proceedings before the arbitrator were not sought to be stayed pending the application for revoking the reference but if the reference is void, the award also would be void.

Coming to the merits, it has been found that the agreement which was executed on 26-2-1960 had provided only a period of three months for making the award and that the application for reference to arbitration was filed in court only on 14-2-1960, i.e., after the expiry of this term. There was some controversy about the date of execution of the agreement. The only date it bears is 26-2-1960. The petitioner had a case in the court below that 26-2-1960 was the date on which the agreement was drawn up and that it was signed only on 12-9-1960 but this was not accepted by the lower Court. It was argued on behalf of the petitioner that even if the agreement was executed on 26-2-1960, none of the parties had raised any objection when it was filed in court on 14-9-1960 or when the time for submission of the award was extended from time to time and that the expiry of the term was not fatal. There is however one fact which makes it difficult to accept this argument. When the court makes a reference in a pending suit it has to be done with the consent of all the parties. Two of the defendants were ex parte in the suit and they were not given any notice of the application for reference to arbitration. Such being the case, the fact that no party objected to the application for reference is of no consequence. The reference, having been made after the expiry of the period agreed to by the parties, is bad in law.

This leads to the question whether a reference made without notice to all the parties is proper. Section 21 of the Arbitration Act provides:

Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration, they may at any time before judgment, is pronounced apply in writing to the court for an order of reference.

The application in this case was one made by the second defendant alone. Notice was not given to defendants 9 and 10 who were ex patre. It is true that they did not contest the suit but from the fact that they were ex parte it cannot be inferred that they agreed to the decision of the suit by an arbitrator. (Peddibhotla) Venkata Subbayya and Another Vs. (Bhamidipati) Venkataramanayya (dead) and Others, is an authority for the position that a reference made without the concurrence of all the parties to the suit is bad. I may add that there is nothing on record to show that the parties who were not served with notice of the application for reference ratified the same. The reference made by court cannot therefore be supported.

The only question which remains is whether the court was justified in revoking the reference. It was argued that the court would be justified in revoking a reference only when miscarriage of justice would otherwise result. Certain reported decisions were relied on by the petitioner. These, in my opinion, have no application to a case of this nature. It was held in Bhuwalka Bros. Ltd. Vs. Fatehchand Murlidhar, that the discretion vested in court u/s 5 was to be exercised within the following limits: (1) that the court should not lightly release the parties from their bargain--that follows from the sanctity the Court attaches to contracts and (2) that the court should be satisfied that a substantial miscarriage of justice would take place in the event of its refusal to grant the leave. This decision was followed in Raliance Investment Co. Ltd. Vs. Union of India (UOI), . The same view is held in Gaya Prasad v. Firm Mathu Lal Budha Lal ( ATR 1925 All 202), Kewalram v. Diwanchand & Sons (AIR 1928 Sin 195) and Gangaram v. Sumangal (AIR 1933 Sin 367). Unlike these cases, the question here is one of jurisdiction to make the reference. The decisions cited above have therefore no application to this case.

In view of the conclusions reached, the civil revision petition must fail. It is accordingly dismissed but in the circumstances without costs.