M. Venkatasamiappa vs Srinidhi Ltd.

Balakrishna Aiyar, J.—This appeal calls for a construction of certain provisions of the Indian Arbitration Act, 1940. This is how the matter

comes up. Venkatasamiappa, the appellant before us, is a resident of Bangalore city The respondent is a limited liability company called the

Srinidhi Ltd., with its office at No. 292 China Bazaar Road, Madras Between September 1944 and June 1945 the respondent carried out various

works in Bangalore for the Public Works Department of the Government of India. The appellant was a sub contractor supplying at the outset labor

and subsequently various materials for the work, which the respondent was executing in Bangalore. The appellant claimed that in respect of his

dealings with the respondent, he was entitled to be paid a sum of about Rs. 36,000. The respondent company, however, asserted that if the

accounts between the parties were looked into. it would be found that far from their owing any money to the appellant, he would be found liable to

pay them large sums. The disputes between the parties were referred to arbitration by an agreement dated 31-12-1945, which was apparently

executed at Madras. That agreement has not been placed before us; but it is common ground that the arbitrators are all of them residents of

Madras city. After an elaborate enquiry the arbitrators gave their award on 14-5-1947 where under they directed the appellant to pay the

respondent the sum of Rs. 22,346. After making their award, the arbitrators filed a petition under S. 14 (2) of the Indian Arbitration Act, 1940, on

the Original Side of this Court praying that the award be received, that notice of the filing of the award be sent to the parties and that a decree in

terms of the award be passed. At the hearing of the petition Mr. Ranganadha Sastri on behalf of the appellant took the objection that this Court

has no jurisdiction to receive the award. Subba Rao J. who heard the petition, overruled his objection and directed that a decree in terms of the

award be passed. Hence this appeal.

Before us Mr. Ranganadha Sastri raised two points The first is that the view of Subba Rao J. that this Court has jurisdiction to receive the

award and pass a decree in terms there of is erroneous. To assess the validity of his objection, it is necessary to examine the relevant provisions of

the Arbitration Act. S. 2 (c) of the Indian Arbitration Act (X of 1940) defines the word ""Court"" as follows :

Court means a civil Court having jurisdiction to decide the questions forming the subject matter of the reference if the same had been the subject

matter of a suit, but does not, except for the purpose of arbitration proceedings under S. 21, include a Small Cause Court.

S. 31 (1) which contains another provision that has a bearing on this question, is in these terms :

Subject to the provisions of this Act, an award may be filed in any Court having jurisdiction in the matter to which the reference relates.

The combined effect of these two provisions would appear to be this : In order to determine which is the Court having jurisdiction in the matter,

you should first of all ascertain what the questions are, which form the subject matter of the reference to arbitration. You then proceed to ask;

supposing these questions had arisen in a suit, which is the Court which would have jurisdiction to entertain the suit? That Court would be the

Court having jurisdiction under the Arbitration Act also. It was admitted before us that in the present case the contract between the appellant and

the respondent was entered into in Bangalore. The appellant supplied the labor and the materials in Bangalore; the respondent had also a

subsidiary office in Bangalore and the payments made were also at Bangalore. The questions between the parties arose out of this contract and

what the arbitrators had to determine was how much on a settlement of the accounts was due to one side or the other. Obviously, if these

questions had arisen in a suit, the Court which would ordinarily have had jurisdiction in the matter is not this Court, but the Court of Bangalore. The

result cannot be avoided if the jurisdiction of the Court were made dependent on the subject matter of the action. Prima facie, therefore, it would

seem that tins Court has no jurisdiction in the matter, if he had so chosen, could have filed a suit against the respondent in Madras, because it is in

Madras that the respondent company have their registered place of business. This is how the learned Judge viewed the matter :

As aforesaid the dispute between the respondents was that the first respondent claimed a sum of Rs. 36000 from the second respondent under the

contract whereas the second respondent claimed that if the accounts were looked into, a large amount would be due to him. Admittedly the

second respondent is a registered firm having its office at No. 292 China Bazar Road, Madras. The first respondent, if he had wanted, could

certainly have filed the suit with regard to the subject matter of the reference on the original side of this High Court. Clause 12 of the Letters Patent

governs the limits of the original jurisdiction of this Court. Under the said clause in regard to suits other than those for land, the High Court is

empowered to receive, try and determine suits of every description if the defendant at the time of the commencement of the suit shall dwell or carry

on business or personally work for gain within such limits. As admittedly the second respondent carries on business in Madras, the plaintiff could

have filed the suit on the original side of this Court;, in which case the subject matter of the reference would have been the subject matter of suit

pending in this Court. In that view the Court has jurisdiction to receive the award filed under S. 14 of the Arbitration Act.

This passage will itself show that before this Court can acquire jurisdiction over the matter, it would have been necessary for the appellant

before us to have figured as the plaintiff. Not merely that, he must have elected to sue the respondent not in Bangalore, where the suit could

normally have been filed, but in Madras. The jurisdiction of this Court would have been contingent on these two factors and we doubt whether the

jurisdiction conferred by Ss. 2 (c) and 31 (1) is such a contingent jurisdiction. Mr. Viswanatha Aiyar attempted to surmount this difficulty by saying

that in arbitration proceedings both the parties are in the position of plaintiffs and also defendants and for that reason the suit could have been filed

in Madras. Assuming, without granting, that either party could have laid the action in Madras, it will be realized, if one pauses to think over the

matter, that the contention, that in arbitration proceedings both the parties simultaneously fill the role of plaintiff and defendant, makes it more

difficult than ever to construe Ss. 2 (c) and 31 (1) in the manner that Mr. Viswanatha Aiyar desires. Because in that view, the intention which Mr.

Viswanatha Aiyar now attributes to the Legislature could have been sufficiently and more simply expressed in the statute by saying that the Court

having jurisdiction is the Court within the limits of whose territorial jurisdiction any of the parties resides.

The conclusion which Subba Rao J. arrived at, does not, it seems to us, necessarily follow from the words ""employed in the Act''''. It will be

noticed that there is no reference either in S. 2 (c) or S. 31 (1) of the Act to the place where the parties dwell, or carry on business, or personally

work for gain. The jurisdiction of the Court is made to depend not on any of these factors, but solely on the subject matter; there is no reference to

any other circumstance. If the intention of the Legislature had been to confer jurisdiction not merely with reference to the subject matter of the

dispute between the parties, but also with reference to the residence of parties or their place of business, it should not have been difficult to insert

appropriate words in S. 2 (a) and S. 31 (1) of the Act. Analogy and precedent are to be found in some very familiar provisions of the Civil

Procedure Code. The words employed in the Act lay stress on the subject matter of the reference; there is such an avoidance of words having

reference to the place of residence or place of business of the parties that the omission must have been deliberate. And we can think of at least one

good reason why the Court having jurisdiction should have been defined in relation to the subject matter of the dispute or action. Otherwise, the

Court having jurisdiction might depend on the accident as to who first raised the dispute or decides to file a suit.

We find support for our view in the decision in Guardian Assurance Co. Ltd. Vs. Thakur Shiva Mangal Singh J. That case no doubt was under

the Indian Arbitration Act of 1899. But material portions of the discussion would be very apposite under the present Act also. S 2 of the Act of

1899 provided:

This Act shall apply only in cases where if the subject matter submitted to arbitration were the subject of the suit the suit could whether with leave

or otherwise, be instituted in a presidency Town.

If we take out of the section the words confining the operation of the Act to the presidency town as being irrelevant to the present discussion it

will be noticed that the language employed in S. 2 (c) of the Arbitration Act of 1940 introduces the same idea as that in S. (2) of the old Act. The

Court would be the Court to which recourse could have to be had ""if the subject matter submitted to arbitration were the subject of a suit.''''

Examining the provisions of S. 2 of Act IX of 1899, the learned Judges say at page 213 :

The learned Advocate for the respondent has argued before us that the word''s ''subject matter'' used in S. 2 must be understood to mean the

subject matter from the point of view of territorial jurisdiction of the Courts and would not include a case where a suit could be riled in the

presidency town on account of the residence of the defendant. There is no doubt that the legislature instead of saying where the suit could have

been filed has taken care to say where if the subject matter submitted to arbitration were the subject of a suit, the suit could be filed. The emphasis

accordingly is on the subject matter in dispute being the subject of a suit. This seems to be quite independent of the case where the suit is

maintainable on account of the residence of the defendant. If the subject matter of the suit be such that a suit could be brought in respect of it in

Calcutta, the case would fall under S. 2 for it does not speak of a suit being brought as between the parties, but merely speaks of the subject

matter being the subject of a suit in the Presidency town.

The learned Judges were conscious that the view they were enunciating was contrary to certain observations that had been made in two earlier

cases, one of Bombay and the other of Sind and they pointed out that the observations made in the Bombay case were not necessary for the

purpose of deciding that case. In dealing with the Sind case, they recognized that the point did arise for decision inasmuch as the defendants therein

resided in Karachi and it was considered that the suit, could for that reason, have been instituted in Karachi, Nevertheless, they said :

The words used in S. 2 are far more specific and significant than the mere word ""matter"" used in Para 17 of the schedule, and we think that the

Legislature intended to confine the applicability of the Arbitration Act to cases where the subject matter in dispute was of such a nature as to be the

subject of dispute in a Presidency town and not to cases where the subject matter was not of such a nature and the suit could be filed because the

defendant happened to be there. This is in accordance with the observation made in In re Babaldas Khemchand, 45 Bom. 1.

It is possible to argue that in certain cases, as for instance where there is a dispute whether a person has been adopted by another or not, the

question as to which Court has jurisdiction would depend upon where the parties reside. That possibility does not, we think, invalidate our

argument that the jurisdiction conferred by S. 2 (c) and S. 31 45 Bom. 1 is a jurisdiction dependent upon the questions that form the subject matter

of the reference and that it is not dependent on the residence or place of business of the parties. It is only when the subject matter of the dispute

itself makes the jurisdiction dependent on residence, that the question of residence need arise at all. It is needless to say more about this aspect,

because it does not really arise and was not argued. In any case, regard being had to the phraseology of the Act, the question of residence in such

cases would, it seems to us, become relevant only should it arise out of, or in connection with the subject matter of the dispute and the reference.

Mr. Viswanatha Aiyar, the learned Advocate for the respondent, sought support for the judgment under appeal in Cursetji Jamshedji Ardaseer

Wadia Vs. Dr. R.d. Shiralee, . In that case the trustees of certain properties granted a lease to one Dr. Shiralac. The lease deed provided that after

the expiration of the period mentioned in it, the lessee was to have the option of receiving the value of the buildings as fixed by three ""panchas"" one

pancha to be appointed by the lessee, another to be appointed by the lessor and a third on behalf of both. If the value put on the constructions by

the panchas was not acceptable to the lessee, he was to have the option of removing the structures and giving vacant possession. After the lease

terminated, the lessee appointed one Kamtekar as arbitrator on his behalf to value the structures and called upon the trustees to appoint their

arbitrator. They declined to do so. Thereupon, Kamtekar proceeded to value the property as though he were the sole arbitrator and made a

report, which he called an ""award"". The trustees then filed a petition to set aside the ""award"". Objection was taken to the jurisdiction of the Court

on the ground that the properties were at a place called Kurla outside Bombay city, that the rents were recovered at Kurla, that the lease was

executed at Kurla and that, therefore, the whole cause of action arose at Kurla. It was also argued that all the trustees did not reside in Bombay

and that, therefore, the Bombay High Court had no jurisdiction to accept the award. The Court overruled the objections and held that it had

jurisdiction and set aside the ""award"" of Kamtekar. Mr. Viswanatha Aiyar referred in particular to this passage in the judgment printed on page 34

:

In my opinion the construction sought to be put on S. 2 (c) by the petitioners is erroneous. It does not mean that a Court has jurisdiction to receive

an award only if the whole cause of action arose within the jurisdiction of the Court. Reading the sub-section as worded, it is clear, that any Court

which would have jurisdiction to decide the question arising from the subject matter of the reference, would be the proper Court in which the

award may be filed. To give the Court jurisdiction it is not necessary that the whole cause of action should arise there. The Court has jurisdiction to

determine the subject, matter of the disputes between the parties also when the parties reside within its jurisdiction or the land was within its

jurisdiction.

In respect of this decision certain observations may be made. In the first place, it does not appear that the decision of the Bench in Guardian

Assurance Co. Ltd. Vs. Thakur Shiva Mangal Singh , which we have referred to was cited before the learned Judge in Bombay. In the second

place, the learned Judge did not give any reasons for expressing the view he did. Thirdly, when we examine the matter, it will be seen that these

observations are really in the nature of obiter. The learned Judge found that Kamtekar had no jurisdiction to proceed alone as he purported to do.

From this it follows that what he called an ""award"" was a mere nullity. There had really been neither any reference to arbitration, nor any arbitration

and the act of Kamtekar, though professedly under the Arbitration Act of 1940, was really outside it. If the trustees in the case had been forced to

file a suit for a declaration that the alleged award of Kamtekar was not binding on them, they could have brought it in the Bombay High Court,

since it appears from the judgment itself that all the parties whom it was necessary to impaled, were residents of Bombay city. Finally, in the case

before us all the parties are not resident in Madras.

Mr. Viswanatha Aiyar, the learned Advocate for the respondent next argued that the parties before us had agreed to have their differences

settled by arbitration in Madras and that this agreement between them would give jurisdiction to this Court; because, according to him, that

agreement would be part of the cause of action. In respect of this contention we have to observe that the agreement, which the appellant and the

respondent entered into, has not been placed before us. Besides, according to S. 2 (c) and S. 31 A. I. R. 1937 A11 208. the Court which would

have jurisdiction would, be, not the Court at the place in which the agreement was entered into, but the Court which would have jurisdiction in

respect of the questions forming the subject matter of the reference.

Mr. Viswanatha Aiyar then urged a further argument based on S. 20 of the Arbitration Act of 1940 and Form 125 (d) of the Original Side

Rules of this Court. Paragraph. 3 of that form runs as follows :

By an agreement in writing dated the day of 19 and entered into by and between the plaintiff and the defendant above named at (place where the

agreement was entered into and signed) within the aforesaid jurisdiction, a copy whereof is hereunto annexed, it was agreed that the following

matters in difference between the parties should be referred to the arbitration of (name, description and place of residence of the Arbitrator) (state

matters of difference).

Mr. Viswanatha Aiyar pointed to the requirement in this paragraph that the place where the agreement to refer to arbitration was entered into

should be specified in the appropriate place and stressed the words ""within the aforesaid jurisdiction"" occurring there and argued that if the place

where the agreement was entered into is Madras, that fact would give jurisdiction to this Court. In respect of this reasoning we would first state

that Mr. Viswanatha Aiyar himself conceded that S. 20 is not directly applicable and that he referred to it only by way of analogy. We consider

that this analogy is not sufficiently close. S. 20 (1) applies ""to a Court having jurisdiction in the matter to which the agreement relates'''', whereas in

S. 31 (1) the Court having jurisdiction is not the Court having jurisdiction in the matter to which the agreement relates, but the Court having

jurisdiction in the matter to which the reference relates. Besides, we do not think that it would be right to construe a statute with reference to forms

prescribed not by the Legislature, but by this Court on its administrative side.

Continuing his argument Mr. Viswanatha Aiyer stated that the agreement of the parties to refer their disputes to three arbitrators resident in

Madras postulated an intention to be bound by the law in Madras and also to submit to the jurisdiction of this Court. To support this position he

referred to Dicey''s Conflict of Laws, VIth Edn. at page 191, where N. V. Kwike Hoo Tong Handel Maatchappig v. James Finlay and Co. 1927

A. C. 604, is cited. The relevant note is as follows :

A, a Scottish merchant, entered into an agreement with X, a Hong Kong merchant, for sugar to be shipped from Java to Bombay, one condition

being that any dispute should be settled by arbitration of London brokers in the usual manner, and this submission may be made a rule of Court.

This condition contains an explicit agreement that the law which should regulate the decision is the law of England. The Court has jurisdiction.

One obvious point of distinction between the decision referred to in Dicey and the present case is this. In the case cited in Dicey, the

agreement that the parties were to be bound by the law of England was itself an integral part of the original contract between them. It is not alleged

that anything similar was the case here. When the appellant and the respondent entered into their contract in Bangalore they did not agree expressly

or even by implication to be bound by the law in Madras, or to submit to the jurisdiction of the Court here. As we have already stated the

agreement between the appellant and the respondent to refer the dispute to the arbitrators, who filed the application on the original side of this

Court, is not before us, and we are not prepared to accede to the contention of Mr. Viswanatha Aiyar that merely because the three arbitrators

happen to be residents of Madras, we must presume an intention to submit to the jurisdiction of this Court.

The matter is one of some difficulty; but after carefully examining all the arguments placed before us, we are inclined to take the view that this

Court has no jurisdiction in the matter and that the appeal must succeed on that ground.

The second point raised by Mr. Ranganadha Sastri may be more briefly disposed of. In the present case, the arbitrators did not give their

award within the four months specified in the first schedule to the Act of 1940. Before that award could have been received, argued Mr.

Ranganatha Sastry, the delay in making the award should have been excused by the Court and under Art. 158 of the Limitation Act, he was

entitled to thirty days from the date on which the delay was excused, to file his objections. This was not done and, for that reason, he contended

that the decree is liable to be set aside. We do not think there is any substance in this objection. In the notice issued, the appellant was given a very

much longer period than thirty days to file his objections. We have not been referred to any decision in which it has been laid down that a

consolidated notice should not be issued, as was done in the present case and that thirty days should be allowed from the date of the order

excusing the delay- It is unnecessary to pursue this matter further, since the appellant is entitled to succeed on the first point

In the result, the appeal is allowed with taxed costs both before us and before Subba Rao J. The decree made in terms of the award is set

aside and the award ordered to be returned. Advocate''s fee Rs. 250 in appeal.

Horwill, J.

I have had the advantage of reading the judgment that my learned brother is about to deliver and respectfully agree with its reasoning. It seems to

me that much of the difficulty that has arisen in this and similar cases is due to the overlooking of the fact that S. 2 (c) of the Act merely defines the

word ""Court,'''' and that if one has to decide which of the Courts satisfying the definition of the word ""Court"" in S. 2 (c) is the Court in which the

award has to be filed, one must look to S. 31 (1) and that section alone. S. 2(c) does not purport to prescribe the Court in which the award should

be filed. It restricts the meaning of the word Court'''' to the class of civil Courts that can decide the questions forming the subject matter of the

reference if they had arisen in a suit properly before the Court. The difficulty in the construction of this section arises only from the circumstance

that the word ""Court"" would have meanings which would vary with the subject matter of the reference. In the present case, for example, District

Munsifs'' Courts would not be Courts within the definition. If now we have regard to S. 31 (1) to ascertain in which Court, as the word is defined

in S. 2 (c), the award has to be filed, we find that it is the Court that has jurisdiction over the subject matter of the award, the omission of any

reference to residence being presumably for the reason that in filing an award there is no plaintiff and no defendant. If the subject matter of the

reference alone determines jurisdiction, then admittedly this appeal will have to be allowed.