Kunheen Marakkar vs Kunhipathumma and Others

Varadaraja Iyengar, J.—This revision is by the 1st defendant and is directed against an order of the Court below which allowed to certain extent, a petition u/s 33 of the Indian Arbitration Act, filed by the respondent-plaintiff before it.

The suit was one for partition and recovery of the plaintiff''s share with profits. Pending Suit, the parties compromised their differences by agreeing to the properties available for partition, the shares duo to the parties, and also the properties from which and the period during which the parties were liable for mesne profits inter se. But they left the estimation of the actual amount of profits and also the valuation of the properties to a lawyer Padnanabhan Nair and following the valuation, the division and allotments to Kunhahammad Musaliar who was also to decide the question of costs. The parties agreed finally to execute and register a partition deed to be drawn up by the said Musaliar in accordance with his decisions.

The parties incorporated their agreements aid understandings as above, in a joint application which they made to Court on 3-2-1950, with prayer added that a preliminary decree, in terms of the settlement, may be passed. The Court complied with the prayer and passed preliminary decree on the same date. Subsequently, on 16-9-1952 the plaintiff made applications to Court, firstly for removing the arbitrator Kunhahammad Musaliar from his office as such, on account of his failure to have the properties divided; secondly for steps to be taken by Court in pursuance to the preliminary decree, by issue Of a commission for effecting partition as per the preliminary decree. The defendants 1 to 3 objected to the petitions on the basis that under the compromise the suit had been terminated and the parties did not contemplate any further proceedings through Court.

By order dated 22-1-1954 the Court found that no sufficient ground for removing the arbitrator had been made out, but at the same time, he must be impelled to fulfill his function. Accordingly the Court prescribed a further period of three months from the date of the order for the making of the award. By 10-9-1954, however, the arbitrator had not made his award and on that day the plaintiff filed petition to call upon the arbitrator to file his award but before the petition was disposed of, he filed the present petition under S. 53 challenging ''the validity of the arbitration agreement between the parties and praying for its displacement altogether.

According to the plaintiff the entire proceedings commencing with the application of 3-2-1950 were null and void and the suit must be deemed to he still pending so as to be continued from the stage at which it had reached prior to the filing of the petition, This petition was opposed by the defendants 1 to 3 on the ground they had earlier taken, that the suit had been finally terminated and was no longer liable to be revived. According to the defendants, the final decree had been passed by the Court though it might be that all the disputes involved in the suit had not been completely disposed of but that was because the parties had not contemplated any further approach to the Court.

The Court below found that by the petition of 3-2-1950 the parties had intended and purported to refer disputes between them involved in a pending suit to arbitration and such reference not having been made with the intervention of the Court as provided in Chapter IV of the Arbitration Act, was not valid in law. But on the further question as to what should follow, the Court refused to accept either of the extreme position taken by the parties and so it upheld the decree passed on 3-2-1950 as a valid preliminary decree. In the result the petitioner was allowed to avoid the procedure arbitrator and his award, and get an a from the Court itself, as regards the question: the parties had left open in their petition of 8-(sic) Hence this revision by the 1st defendant (sic)

Learned counsel for the 1st defendant (sic) not dispute the position that a private reference arbitration in a pending suit without the knowledge of the Court and without its direction is invalid an that an award resulting therefrom could not be made a rule of Court unless all the parties interested in the suit consent to the award being filed into Court as a compromise or adjustment of the suit under Order XXIII, Rule 3, C. P. C. Indeed the principle has become too well settled that when once the parties have submitted to the jurisdiction of the Court for an adjudication of the points in controversy between them, the exercise of such jurisdiction by the Court will not be suspended or hampered by any private reference to arbitration; nor is a parallel adjudication of the same subject-matter by a private tribunal permissible under law.

And the further question which had given rise to a conflict of opinion, viz., whether under the proviso to Section 47 of the Indian Arbitration Act, 1940 an award passed on a private reference in pending suits can be enforced as a compromise of the suit even when one of the parties refused to accept it has also now become uniformly settled that the consent contemplated by the proviso is not merely the antecedent agreement to refer to arbitration but the consent for the award itself. See Abdul Rahman v. Md. Siddiq AIR 1S53 Mad 781 : Jugaldas Damodar Modi and Co. Vs. Pursottam Umedbhai and Co., ; Raghunandan Rai and Others Vs. Sukhlal Rai, and Phool Narain v. Madan Gopal, (S) AIR 1955 Raj 162 and Kerala Varma Thampuran v. Achutha Marar ILR (1953) Trav Co. 974.

But learned counsel contends that the reference in this case though not in terms so made must still he deemed to be through intervention of Court, so as not to involve any question of invalidity of the reference or the award following. And he referred to Musammat Kulsum Fatma Vs. Saiyed Ali Akbar and Others, Nidamurthi Krishnamurthi v. Gatapatilingam 34 Ind Gas 741: AIR 1917 Mad 6561 and Venkatachalam v. Ramanathan 70 1nd Gas 410 : AIR 1922 Mad 429.

Section 21 of the Arbitration Act, which is in Chapter IV which deals with arbitration in suits runs thus :

"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 .

Section 23 provides :

"1. The Court shall be order refer to the arbitrator the matter in difference which he is required to determine, and shall in the order specify such time as it thinks reasonable for the making of the award.

Where a matter is referred to arbitration, the Court shall not, save in the manner and to the extent provided in this Act, deal with such matter in the suit''.

Therefore in order to vest jurisdiction in the arbitrator to deal with a pending suit it appears to be necessary that the Court should make an order referring the suit to him and shall specify in the order such time as it thinks." reasonable for the making of the award. So in Narayanaswami v. Manicka AIR 1646 Mad 80, where, after a preliminary decree was passed in a partition suit and a Com (sic) pointed for taking accounts and (sic) property, the parties made an appliant (sic) that view had executed a muchilika in (sic) Panchayatdars for settling the suit and (sic) that the documents filed by the parties into (sic) might be returned to them for being placed (sic) the panchayatdars and the Court made an user directing delivery of the documents to the plaintiffs pleader for production before the panchayatdars it was held by Yabya Ali, J., that the order passed by the Court was not an order of reference to arbitration within the meaning of Section 23 and the Court could call back the documents and deal with the suit itself and the learned Judge observed:

"It is only when the matter is referred to arbitration by the Court in that manner under Sub-section (1) of Section 23, the Court ceases to have jurisdiction to deal with the suit or such matters therein that are referred to arbitration".

Now, it may be conceded, that the substance of the whole matter as distinguished from the mere form of it, may be looked into to decide whether there is a reference to arbitration by order of Court or otherwise. For after all, the question of the manner of making the reference is one of procedure. But in any case to hold an arbitration pending suit to be valid, the action of Court and of the parties must establish a substantial reference by the Court. Thus in Musammat Kulsum Fatma Vs. Saiyed Ali Akbar and Others, the question was whether in spite of the fact that there was no order of reference by Court in so many terms it could still be deemed to have been so made.

The learned Judges answered the question in the affirmative, in view of the proceedings which were really had in Court in connection with the arbitration. There the parties expressly informed the Court that they had referred the case to arbitrator and asked the Court over and over again to grant time for the preparation and submission of that arbitrator''s award,

In AIR 1917 Mad 656 (1) an application for adjournment, in which the Court was asked to send the record to certain arbitrator to whom the parties had already referred the matter in dispute in the pending suit was held to be an application under Sch. 2, Section 1, para (1), C. P. C. The facts in AIR 1922 Mad 429 , were similar to those in Musammat Kulsum Fatma Vs. Saiyed Ali Akbar and Others, already referred to. Papier J., with whom Sadasiva Iyer j., agreed, observed that there had been substantially though not in form, a re ference by the Court which had the consent of the parties and went on :

"If the strict requirements of the schedule are to be adhered to, the Court must, before the arbitrator commences, refer to the arbitrator the matter in difference which he is required to determine and it follows that if the matter has already been referred by agreement, no reference can be made by the Court, I cannot imagine any result more unfortunate, I see no reason why parties should not, even when they did not originally intend the matter to be treated as a reference through Court, subsequently agree that it should be so treated so as to get a finality to the decision. Such a, desire might very naturally arise out of an agreement to refer and in no way offends against any principle affecting arbitration of suits. In my opinion it is far more important to all litigants to settle matters in dispute as they desire than to prevent them evading statutory defections."

The question still is whether there has been in this case a substantial reference through Court in the above sense. Learned counsel is unable to refer to any actions of the parties or of the Court except those connected with the plaintiff''s petitions dated 18-9-1952 and 10-9-1954 for removal of the arbitrator Kunhahammad Musaliar, and for calling on him to file the award into Court. But the former petition did not assume any reference to him through Court and indeed the defendants position when they objected to the petition was that the suit had been terminated by the compromise of 3-2-1950 and therefore the parties did not contemplate any proceedings through Court.

The order of Court on the petition also definitely proceeded on the basis that the reference in the case was not by the Court but only by agreement between the parties and so Sections 5, 8 and 11 of the Arbitration Act applied. Nor could reliance be placed on the latter petition because for one thing, it is, Still pending and so no estoppel could be founded thereon and again there is nothing in it to indicate am arbitration through Court. ;

It is not contended that if the reference of the outstanding matters in dispute to Musaliar contained in the petition of 3-2-1950 is invalid, "the further posting of the case in connection with the passing of the final decree is in any way wrong.

It follows, therefore, that the order of the Court below is perfectly right and no interference is called for. The revision petition is therefore dismissed with costs.